<PAGE> 1
As filed with the Securities and Exchange Commission on April 2, 1999
Registration No. 2-79285/811-3567
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
POST-EFFECTIVE AMENDMENT NO. 48
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
AMENDMENT NO. 49
MERCANTILE MUTUAL FUNDS, INC.
(formerly known as THE ARCH FUND, INC.)
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road
Columbus, Ohio 43219
(Address of Principal Executive Offices)
Registrant's Telephone Number: (800) 551-3731
W. BRUCE MCCONNEL, III, Esq.
Drinker Biddle & Reath LLP
1100 Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Name and Address of Agent for Service)
Copy to:
Jon W. Bilstrom, Esq.
Mercantile Bank of St. Louis N.A.
One Mercantile Center
8th and Washington Streets
St. Louis, MO 63101
It is proposed that this filing will become effective (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Common Stock.
<PAGE> 2
THIS POST-EFFECTIVE AMENDMENT IS BEING FILED SOLELY WITH RESPECT TO
INSTITUTIONAL SHARES OF REGISTRANT'S PORTFOLIOS IN ORDER TO ADD FINANCIAL
HIGHLIGHTS FOR INSTITUTIONAL SHARES OF THE GROWTH EQUITY PORTFOLIO THAT WERE
INADVERTENTLY OMITTED FROM POST-EFFECTIVE AMENDMENT NO. 47 ("PEA NO. 47") TO
REGISTRANT'S REGISTRATION STATEMENT ON FORM N-1A FILED ON MARCH 30, 1999. THE
PROSPECTUSES FOR TRUST SHARES, TRUST II SHARES, INVESTOR A SHARES AND INVESTOR B
SHARES OF REGISTRANT'S PORTFOLIOS AND THE STATEMENT OF ADDITIONAL INFORMATION
FOR TRUST SHARES, TRUST II SHARES, INSTITUTIONAL SHARES, INVESTOR A SHARES AND
INVESTOR B SHARES OF REGISTRANT'S PORTFOLIOS ARE INCORPORATED HEREIN BY
REFERENCE TO PEA NO. 47.
<PAGE> 3
MERCANTILE MUTUAL FUNDS, INC.
PROSPECTUS
MARCH 31, 1999
MONEY MARKET PORTFOLIOS
Treasury Money Market Portfolio
Money Market Portfolio
TAXABLE BOND PORTFOLIOS
U.S. Government Securities Portfolio
Intermediate Corporate Bond Portfolio
Bond Index Portfolio
Government & Corporate Bond Portfolio
STOCK PORTFOLIOS
Balanced Portfolio
Equity Income Portfolio
Equity Index Portfolio
Growth & Income Equity Portfolio
Growth Equity Portfolio
Small Cap Equity Portfolio
Small Cap Equity Index Portfolio
International Equity Portfolio
Institutional Shares
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved any shares of these Portfolios or determined if
this prospectus is truthful or complete. Anyone who tells you otherwise
is committing a criminal offense.
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY
[Scale
Icon]
3 Overview
5 Treasury Money Market Portfolio
8 Money Market Portfolio
11 U.S. Government Securities Portfolio
14 Intermediate Corporate Bond Portfolio
18 Bond Index Portfolio
21 Government & Corporate Bond Portfolio
25 Balanced Portfolio
29 Equity Income Portfolio
32 Equity Index Portfolio
35 Growth & Income Equity Portfolio
38 Growth Equity Portfolio
41 Small Cap Equity Portfolio
44 Small Cap Equity Index Portfolio
46 International Equity Portfolio
49 Additional Information on Risk
YOUR ACCOUNT
[Magnifying
Glass Icon]
50 Explanation of Sales Price
51 How to Buy Shares
52 How to Sell Shares
53 How to Exchange Shares
53 Administrative Services Fees
53 General Transaction Policies
DISTRIBUTIONS AND TAXES
[Line Graph
Icon]
54 Dividends and Distributions
55 Taxation
MANAGEMENT OF THE FUND
[Open Book
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56 The Adviser
56 The Sub-Adviser
FINANCIAL HIGHLIGHTS
[Money in
Hand Icon]
57 Introduction
58 Financial Highlights
</TABLE>
2
CONTENTS
<PAGE> 5
<TABLE>
<S> <C>
This prospectus describes Institutional Shares of fourteen
investment portfolios (the "Portfolios") offered by
Mercantile Mutual Funds, Inc. (the "Fund"). The Fund was
formerly known as The ARCH Fund(R), Inc. On the following
pages, you will find important information about each
Portfolio, including:
- A description of the Portfolio's investment objective
(sometimes referred to as its goal);
- The Portfolio's principal investment strategies (the steps
it takes to try to meet its goal);
- The principal risks associated with the Portfolio (factors
that may prevent it from meeting its goal);
- The Portfolio's past performance (how successful it's been
in meeting its goal); and
- The fees and expenses you pay as an investor in the
Portfolio.
WHO MAY WANT TO INVEST IN The Treasury Money Market Portfolio may be appropriate for
THE PORTFOLIOS? investors who want a way to earn money market returns from
U.S. Treasury obligations that are generally exempt from
state and local taxes. The Money Market Portfolio may be
appropriate for investors who want a flexible and convenient
way to manage cash while earning money market returns.
The Taxable Bond Portfolios may be appropriate for investors
who seek current income from their investments greater than
that normally available from a money market fund and can
accept fluctuations in price and yield. The Portfolios may
NOT be appropriate for investors who are investing for
long-term capital appreciation.
The Stock Portfolios may be appropriate for investors who
seek capital growth over the long term and are comfortable
with the risks of stock markets. The Portfolios may NOT be
appropriate for investors who are investing for short-term
goals or are mainly seeking current income.
Before investing in a Portfolio, you should carefully
consider:
- Your own investment goals
- The amount of time you are willing to leave your money
invested
- How much risk you are willing to take.
</TABLE>
[Scales
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RISK/RETURN SUMMARY OVERVIEW
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<PAGE> 6
<TABLE>
<S> <C>
THE INVESTMENT ADVISER Mississippi Valley Advisors Inc. ("MVA" or the "Adviser")
serves as the investment adviser to each Portfolio. Founded
in 1987, MVA is a subsidiary of Mercantile Bancorporation
Inc., a regional banking and financial services
organization, and has its main office at One Mercantile
Center, Seventh and Washington Streets, St. Louis, Missouri
63101. As of December 31, 1998, MVA had approximately $9.9
billion in assets under management, including the Fund's
assets, which were approximately $4.3 billion.
An investment in the Portfolios is not a Mercantile Bank
deposit and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government
agency. Although each of the Money Market Portfolios seeks
to preserve the value of your investment at $1.00 per share,
it is possible to lose money by investing in the Portfolios.
You could also lose money by investing in one of the Taxable
Bond or Stock Portfolios.
</TABLE>
RISK/RETURN SUMMARY OVERVIEW
4
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<PAGE> 7
[Scales
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TREASURY MONEY
RISK/RETURN SUMMARY MARKET PORTFOLIO
MONEY MARKET
INSTRUMENTS are
short-term obligations
issued by banks,
corporations, the U.S.
Government and state
and local governments.
Money market
instruments purchased
by the Money Market
Portfolios must meet
strict requirements as
to investment quality,
maturity and
diversification. The
Money Market
Portfolios generally
do not invest in
securities with
maturities of more
than 397 days and the
average maturity of
all securities held by
a particular Money
Market Portfolio must
be 90 days or less.
Prior to purchasing a
money market
instrument for one of
the Money Market
Portfolios, the
Adviser must determine
that the instrument
carries very little
credit risk.
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE
The Portfolio's investment objective is to seek a high level
of current income exempt from state income tax consistent
with liquidity and security of principal.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio invests substantially all (but not less than
65%) of its total assets in money market instruments issued
by the U.S. Treasury and certain U.S. Government agencies
and instrumentalities that provide income that is generally
not subject to state income tax.
PRINCIPAL RISK CONSIDERATIONS
The yield paid by the Portfolio will vary with changes in
interest rates.
Although U.S. Government securities, particularly U.S.
Treasury obligations, have historically involved little
risk, if an issuer fails to pay interest or repay principal,
the value of your investment could decline.
The Adviser evaluates the rewards and risks presented by all
securities purchased by the Portfolio and how they may
advance the Portfolio's investment objective. It is
possible, however, that these evaluations will prove to be
inaccurate.
There's no guarantee the Portfolio will be able to preserve
the value of your investment at $1.00 per share.
</TABLE>
5
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<PAGE> 8
TREASURY MONEY
RISK/RETURN SUMMARY MARKET PORTFOLIO
RETURN HISTORY
The bar chart and table on
this page show the
Portfolio's annual returns
and long-term performance,
thereby giving some
indication of the risk of
investing in the Portfolio.
The bar chart shows how the
performance of the
Portfolio's Institutional
Shares has varied from year
to year. The table shows
the Portfolio's average
annual returns for one
year, five years and since
inception. Both the bar
chart and table assume
reinvestment of all
dividends and
distributions. The
Portfolio's past
performance does not
necessarily indicate how it
will perform in the future.
INSTITUTIONAL SHARES*
YEAR-BY-YEAR TOTAL RETURNS
(AS OF DECEMBER 31 EACH YEAR)
[BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
'1993' 2.43%
'94' 3.33%
'95' 4.97%
'96' 4.43%
'97' 4.54%
'98' 4.34%
</TABLE>
<TABLE>
<S> <C>
Best quarter: 1.26% for the quarter ending
June 30, 1995
Worst quarter: 0.58% for the quarter ending
June 30, 1993
</TABLE>
AVERAGE ANNUAL TOTAL
RETURNS
for the periods ended
December 31, 1998
<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS INCEPTION**
<S> <C> <C> <C>
Institutional Shares* 4.34% 4.32% 3.84%
</TABLE>
* Institutional Shares of the Portfolio commenced operations on January 26,
1995. Total returns for prior periods reflect the performance of the
Portfolio's Investor A Shares.
** April 20, 1992.
To obtain the Portfolio's current 7-day yield, please call 1-800-452-4015.
6
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<PAGE> 9
TREASURY MONEY
RISK/RETURN SUMMARY MARKET PORTFOLIO
The table on the right shows the
fees and expenses that you pay if
you buy and hold Institutional
Shares of the Treasury Money
Market Portfolio.
FEES AND EXPENSES
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM INSTITUTIONAL
THE PORTFOLIO'S ASSETS) SHARES
<S> <C> <C>
Management Fees .40%(1)
Distribution (12b-1) Fees None
Other Expenses .56%(1)
Total Annual Portfolio Operating Expenses .96%(1)
</TABLE>
(1) Management Fees, Other Expenses and
Total Annual Portfolio Operating
Expenses for the Portfolio's
Institutional Shares for the current
fiscal year are expected to be less
than the amounts shown above because
certain of the Portfolio's service
providers are voluntarily waiving a
portion of their fees and/or
reimbursing the Portfolio for certain
other expenses. These fee waivers
and/or reimbursements are being made in
order to keep the annual fees and
expenses for the Portfolio's
Institutional Shares at a certain
level. MANAGEMENT FEES, OTHER EXPENSES
AND TOTAL ANNUAL PORTFOLIO OPERATING
EXPENSES, AFTER TAKING THESE FEE
WAIVERS AND EXPENSE REIMBURSEMENTS INTO
ACCOUNT, ARE EXPECTED TO BE .35%, .45%
AND .80%, RESPECTIVELY, FOR
INSTITUTIONAL SHARES. These fee waivers
and expense reimbursements may be
revised or cancelled at any time.
This example will help you
compare the cost of
investing in the Portfolio
with the cost of investing
in other mutual funds. The
example assumes that you
invest $10,000 for the time
periods shown, reinvest all
of your dividends and
distributions, and then sell
all of your shares at the
end of those periods. The
example also assumes that
your investment has a 5%
return each year and the
Portfolio's operating
expenses remain the same.
Although your actual costs
may be higher or lower,
based on these assumptions
your costs would be:
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
INSTITUTIONAL SHARES $98 $306 $531 $1,178
</TABLE>
7
<PAGE> 10
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE
The Portfolio's investment objective is to seek current
income with liquidity and stability of principal.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio invests substantially all (but not less than
80%) of its total assets in a broad range of money market
instruments, including commercial paper, notes and bonds
issued by U.S. and foreign corporations, obligations issued
by the U.S. Government and its agencies and
instrumentalities, and obligations issued by U.S. and
foreign banks, such as certificates of deposit, letters of
credit, bankers' acceptances and time deposits.
The Portfolio will only buy a money market instrument if it
has the highest short-term rating from at least two
nationally recognized statistical rating organizations, such
as Standard & Poor's Ratings Group or Moody's Investors
Service, Inc., or only one such rating if only one
organization has rated the instrument. If the money market
instrument is not rated, the Adviser must determined that it
is of comparable quality to eligible rated instruments.
PRINCIPAL RISK CONSIDERATIONS
The yield paid by the Portfolio will vary with short-term
interest rates.
Although credit risk is very low because the Portfolio only
invests in high quality obligations, if an issuer fails to
pay interest or repay principal, the value of your
investment could decline.
The Adviser evaluates the rewards and risks presented by all
securities purchased by the Portfolio and how they may
advance the Portfolio's investment objective. It is
possible, however, that these evaluations will prove to be
inaccurate.
There's no guarantee the Portfolio will be able to preserve
the value of your investment at $1.00 per share.
</TABLE>
[Scale
Icon]
MONEY MARKET
RISK/RETURN SUMMARY PORTFOLIO
8
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<PAGE> 11
RETURN HISTORY
The bar chart and table on this page
show the Portfolio's annual returns and
long-term performance, thereby giving
some indication of the risk of
investing in the Portfolio. The bar
chart shows how the performance of the
Portfolio's Institutional Shares has
varied from year to year. The table
shows the Portfolio's average annual
returns for one year, five years, ten
years and since inception. Both the bar
chart and table assume reinvestment of
all dividends and distributions. The
Portfolio's past performance does not
necessarily indicate how it will
perform in the future.
INSTITUTIONAL SHARES*
YEAR-BY-YEAR TOTAL RETURNS
(AS OF DECEMBER 31 EACH YEAR)
[BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
'1989' 9.19%
'90' 8.03%
'91' 5.45%
'92' 3.06%
'93' 2.51%
'94' 3.55%
'95' 5.36%
'96' 4.77%
'97' 4.96%
'98' 4.90%
</TABLE>
Best quarter: 2.36% for the
quarter ending
June 30, 1989
Worst quarter: 0.61% for the
quarter ending
June 30, 1993
AVERAGE ANNUAL TOTAL
RETURNS
for the periods ended
December 31, 1998
<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION**
<S> <C> <C> <C> <C>
Institutional Shares* 4.90% 4.71% 5.16% 5.36%
</TABLE>
* Institutional Shares of the Portfolio commenced operations on January 3,
1994. Total returns for prior periods reflect the performance of the
Portfolio's Investor A Shares.
** March 24, 1983.
To obtain the Portfolio's current 7-day yield, please call 1-800-452-4015.
MONEY MARKET
RISK/RETURN SUMMARY PORTFOLIO
9
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<PAGE> 12
MONEY MARKET
RISK/RETURN SUMMARY PORTFOLIO
The table on the right shows the
fees and expenses that you pay if
you buy and hold Institutional
Shares of the Money Market
Portfolio.
FEES AND EXPENSES
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM THE INSTITUTIONAL
PORTFOLIO'S ASSETS) SHARES
<S> <C> <C>
Management Fees .40%(1)
Distribution (12b-1) Fees None
Other Expenses .53%(1)
Total Annual Portfolio Operating Expenses .93%(1)
</TABLE>
(1) Management Fees, Other Expenses and
Total Annual Portfolio Operating
Expenses for the Portfolio's
Institutional Shares for the current
fiscal year are expected to be less
than the amounts shown above because
certain of the Portfolio's service
providers are voluntarily waiving a
portion of their fees and/or
reimbursing the Portfolio for certain
other expenses. These fee waivers
and/or reimbursements are being made in
order to keep the annual fees and
expenses for the Portfolio's
Institutional Shares at a certain
level. MANAGEMENT FEES, OTHER EXPENSES
AND TOTAL ANNUAL PORTFOLIO OPERATING
EXPENSES, AFTER TAKING THESE FEE
WAIVERS AND EXPENSE REIMBURSEMENTS INTO
ACCOUNT, ARE EXPECTED TO BE .35%, .44%
AND .79%, RESPECTIVELY, FOR
INSTITUTIONAL SHARES. These fee waivers
and expense reimbursements may be
revised or cancelled at any time.
This example will help you
compare the cost of
investing in the Portfolio
with the cost of investing
in other mutual funds. The
example assumes that you
invest $10,000 for the time
periods shown, reinvest all
of your dividends and
distributions, and then
sell all of your shares at
the end of those periods.
The example also assumes
that your investment has a
5% return each year and the
Portfolio's operating
expenses remain the same.
Although your actual costs
may be higher or lower,
based on these assumptions
your costs would be:
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
INSTITUTIONAL SHARES $95 $296 $515 $1,143
</TABLE>
10
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<PAGE> 13
[Scales
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U.S. GOVERNMENT
RISK/RETURN SUMMARY SECURITIES PORTFOLIO
REPURCHASE AGREEMENTS
are transactions in
which a Portfolio buys
securities from a
seller (usually a bank
or broker-dealer) who
agrees to buy them
back from the
Portfolio on a certain
date and at a certain
price.
MORTGAGE-BACKED
SECURITIES are
certificates
representing ownership
interests in a pool of
mortgage loans, and
include those issued
by the Government
National Mortgage
Association ("Ginnie
Maes"), the Federal
National Mortgage
Association ("Fannie
Maes") and the Federal
Home Loan Mortgage
Corporation ("Freddie
Macs").
PORTFOLIO MANAGER
David A. Bethke is the
person primarily
responsible for the
day-to-day management
of the Portfolio. Mr.
Bethke, Senior
Associate, joined MVA
in 1987 and has eight
years of prior
investment experience.
He has managed the
Portfolio since it
commenced operations
in 1988.
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE
The Portfolio's investment objective is to seek a high rate
of current income that is consistent with relative stability
of principal.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio normally invests at least 65% of its total
assets in debt obligations issued or guaranteed by the U.S.
Government and its agencies, including U.S. Treasury bonds,
notes and bills, as well as in repurchase agreements backed
by such obligations. The Portfolio also invests in
mortgage-backed securities issued by U.S.
Government-sponsored entities such as Ginnie Maes, Fannie
Maes and Freddie Macs. The remaining maturity (i.e., length
of time until an obligation must be repaid) of the
obligations held by the Portfolio will vary from 1 to 30
years.
PRINCIPAL RISK CONSIDERATIONS
The prices of debt securities tend to move in the opposite
direction to interest rates. When rates are rising, the
prices of debt securities tend to fall. When rates are
falling, the prices of debt securities tend to rise.
Generally, the longer the time until maturity, the more
sensitive the price of a debt security is to interest rate
changes. Changes in interest rates may also cause certain
debt securities held by the Portfolio, including
mortgage-backed securities, to be paid off much sooner or
later than expected. In the event that a security is paid
off sooner than expected because of a decline in interest
rates, the Portfolio may be unable to recoup all of its
initial investment and may also suffer from having to
reinvest in lower-yielding securities. In the event of a
later than expected payment because of a rise in interest
rates, the value of the obligation will decrease, and the
Portfolio may suffer from the inability to invest in
higher-yielding securities.
The value of debt securities also depends on the ability of
issuers to make principal and interest payments. If an
issuer can't meet its payment obligations, the value of its
debt securities will fall. Securities issued or guaranteed
by the U.S. Government and its agencies have historically
involved little risk of loss of principal if held to
maturity. Certain U.S. Government securities, such as Ginnie
Maes, are supported by the full faith and credit of the U.S.
Treasury. Others, such as Freddie Macs, are supported by the
right of the issuer to borrow from the U.S. Treasury. Other
securities, such as Fannie Maes, are supported by the
discretionary authority of the U.S. Government to purchase
certain obligations of the issuers, and still others are
supported by the issuer's own credit.
Repurchase agreements carry the risk that the other party
may not fulfill its obligations under the agreement.
The Adviser evaluates the rewards and risks presented by all
securities purchased by the Portfolio and how they may
advance the Portfolio's investment objective. It is
possible, however, that these evaluations will prove to be
inaccurate.
</TABLE>
11
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<PAGE> 14
U.S. GOVERNMENT
RISK/RETURN SUMMARY SECURITIES PORTFOLIO
RETURN HISTORY
The bar chart and table on this page
show the Portfolio's annual returns and
long-term performance, thereby giving
some indication of the risk of
investing in the Portfolio. The bar
chart shows how the performance of the
Portfolio's Institutional Shares has
varied from year to year. The table
shows how the Portfolio's average
annual returns for one year, five
years, ten years and since inception
compare to those of a broad-based
market index. Both the bar chart and
table assume reinvestment of all
dividends and distributions. The
Portfolio's past performance does not
necessarily indicate how it will
perform in the future.
KNOW YOUR INDEX
THE LEHMAN BROTHERS
INTERMEDIATE GOVERNMENT
BOND INDEX is an unmanaged
index which tracks the
performance
of intermediate-term
U.S. Government bonds.
INSTITUTIONAL SHARES*
YEAR-BY-YEAR TOTAL RETURNS
(AS OF DECEMBER 31 EACH YEAR)
[BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
'1989' 9.97%
'90' 11.04%
'91' 13.98%
'92' 5.48%
'93' 8.77%
'94' -3.06%
'95' 14.87%
'96' 3.09%
'97' 6.27%
'98' 6.44%
</TABLE>
Best quarter: 5.40% for the
quarter ending
September 30, 1991
Worst quarter: -2.60% for the
quarter ending
March 31, 1994
AVERAGE ANNUAL TOTAL
RETURNS
for the periods ended
December 31, 1998
<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION**
<S> <C> <C> <C> <C>
Institutional Shares* 6.44% 5.36% 7.56% 7.48%
Lehman Brothers Intermediate Government Bond Index 8.49% 6.45% 8.34% 8.25%
</TABLE>
* Institutional Shares of the Portfolio commenced operations on June 7,
1994. Total returns for prior periods reflect the performance of the
Portfolio's Investor A Shares without taking into account the sales charge
payable in connection with purchases of Investor A Shares.
** June 2, 1988 for Investor A Shares; May 31, 1988 for the Lehman Brothers
Intermediate Government Bond Index.
12
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<PAGE> 15
U.S. GOVERNMENT
RISK/RETURN SUMMARY SECURITIES PORTFOLIO
The table on the right shows the
fees and expenses that you pay if
you buy and hold Institutional
Shares of the U.S. Government
Securities Portfolio.
FEES AND EXPENSES
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM THE INSTITUTIONAL
PORTFOLIO'S ASSETS) SHARES
<S> <C> <C>
Management Fees .45%
Distribution (12b-1) Fees None
Other Expenses .62%(1)
Total Annual Portfolio Operating Expenses 1.07%(1)
</TABLE>
(1) Other Expenses and Total Annual
Portfolio Operating Expenses for the
Portfolio's Institutional Shares for
the current fiscal year are expected to
be less than the amounts shown above
because certain of the Portfolio's
service providers are voluntarily
waiving a portion of their fees and/or
reimbursing the Portfolio for certain
other expenses. These fee waivers
and/or reimbursements are being made in
order to keep the annual fees and
expenses for the Portfolio's
Institutional Shares at a certain
level. OTHER EXPENSES AND TOTAL ANNUAL
PORTFOLIO OPERATING EXPENSES, AFTER
TAKING THESE FEE WAIVERS AND EXPENSE
REIMBURSEMENTS INTO ACCOUNT, ARE
EXPECTED TO BE .52% AND .97%,
RESPECTIVELY, FOR INSTITUTIONAL SHARES.
These fee waivers and expense
reimbursements may be revised or
cancelled at any time.
This example will help you
compare the cost of
investing in the Portfolio
with the cost of investing
in other mutual funds. The
example assumes that you
invest $10,000 for the time
periods shown, reinvest all
of your dividends and
distributions, and then
sell all of your shares at
the end of those periods.
The example also assumes
that your investment has a
5% return each year and the
Portfolio's operating
expenses remain the same.
Although your actual costs
may be higher or lower,
based on these assumptions
your costs would be:
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
INSTITUTIONAL SHARES $109 $340 $590 $1,306
</TABLE>
13
- -
<PAGE> 16
[Scales
Icon]
INTERMEDIATE CORPORATE
RISK/RETURN SUMMARY BOND PORTFOLIO
INVESTMENT GRADE DEBT
SECURITIES are those
of medium credit
quality or better as
determined by a
national rating
agency, such as
Standard & Poor's
Ratings Group (debt
securities rated in
the four highest
rating categories,
i.e. BBB or higher)
and Moody's Investors
Service, Inc. (debt
securities rated in
the four highest
rating categories,
i.e. Baa or higher).
The higher the credit
rating, the less
likely it is that the
issuer of the
securities will
default on its
principal and interest
payments.
AVERAGE WEIGHTED
MATURITY gives you the
average time until all
debt securities in a
Portfolio come due or
mature. It is
calculated by
averaging the time to
maturity of all debt
securities held by a
Portfolio with each
maturity "weighted"
according to the
percentage of assets
it represents.
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE
The Portfolio's investment objective is to seek as high a
level of current income as is consistent with preservation
of capital.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio normally invests at least 65% of its total
assets in corporate debt obligations. These include
obligations that are issued by U.S. and foreign business
corporations and obligations issued by agencies,
instrumentalities or authorities that are organized as
corporations by the U.S., by states or political
subdivisions of the U.S., or by foreign governments or
political subdivisions. The Portfolio also invests in
obligations issued or guaranteed by U.S. or foreign
governments, their agencies and instrumentalities and in
mortgage-backed securities, including Ginnie Maes, Fannie
Maes and Freddie Macs.
The Portfolio may only purchase investment grade debt
obligations. Under normal market conditions, however, the
Portfolio intends to invest at least 65% of its total assets
in debt obligations rated in one of the three highest rating
categories. Unrated debt obligations will be purchased only
if they are determined by the Adviser to be at least
comparable in quality at the time of purchase to eligible
rated securities. Occasionally, the rating of a security
held by the Portfolio may be downgraded below investment
grade. If that happens, the Portfolio does not have to sell
the security unless the Adviser determines that under the
circumstances the security is no longer an appropriate
investment for the Portfolio.
In making investment decisions, the Adviser will consider a
number of factors including current yield, maturity, yield
to maturity, anticipated changes in interest rates, and the
overall quality of the investment. The Portfolio's average
weighted maturity will generally be between three and ten
years.
</TABLE>
14
- -
<PAGE> 17
<TABLE>
<S> <C>
PRINCIPAL RISK CONSIDERATIONS
The prices of debt securities tend to move in the opposite
direction to interest rates. When rates are rising, the
prices of debt securities tend to fall. When rates are
falling, the prices of debt securities tend to rise.
Generally, the longer the time until maturity, the more
sensitive the price of a debt security is to interest rate
changes. Changes in interest rates also may cause certain
debt securities held by the Portfolio, including callable
securities and mortgage-backed securities, to be paid off
much sooner or later than expected. In the event that a
security is paid off much sooner than expected because of a
decline in interest rates, the Portfolio may be unable to
recoup all of its initial investment and may also suffer
from having to reinvest in lower-yielding securities. In the
event of a later than expected payment because of a rise in
interest rates, the value of the obligation will decrease,
and the Portfolio may suffer from the inability to invest in
higher-yielding securities.
The value of debt securities also depends on the ability of
issuers to make principal and interest payments. If an
issuer can't meet its payment obligations or if its credit
rating is lowered, the value of its debt securities will
fall.
Foreign investments may be riskier than U.S. investments
because of currency exchange rate volatility, government
restrictions, different accounting standards and political
instability.
The Adviser evaluates the rewards and risks presented by all
securities purchased by the Portfolio and how they may
advance the Portfolio's investment objective. It is
possible, however, that these evaluations will prove to be
inaccurate.
</TABLE>
PORTFOLIO MANAGER
David A. Bethke is the
person primarily
responsible for the
day-to-day management
of the Portfolio. Mr.
Bethke, Senior
Associate, joined MVA
in 1987 and has eight
years of prior
investment experience.
He has managed the
Portfolio since it
commenced operations
in 1997.
INTERMEDIATE CORPORATE
RISK/RETURN SUMMARY BOND PORTFOLIO
15
- -
<PAGE> 18
INTERMEDIATE CORPORATE
RISK/RETURN SUMMARY BOND PORTFOLIO
RETURN HISTORY
The bar chart and table on
this page show the
Portfolio's annual returns
and long-term performance,
thereby giving some
indication of the risk of
investing in the Portfolio.
The bar chart shows the
performance of the
Portfolio's Institutional
Shares during the last
calendar year. The table
shows how the Portfolio's
average annual returns for
one year and since
inception compare to those
of a broad-based market
index. Both the bar chart
and table assume
reinvestment of all
dividends and
distributions. The
Portfolio's past
performance does not
necessarily indicate how it
will perform in the future.
KNOW YOUR INDEX
THE LEHMAN BROTHERS
INTERMEDIATE CORPORATE
BOND INDEX is an unmanaged
index
which tracks the
performance
of intermediate-term
U.S. corporate bonds.
INSTITUTIONAL SHARES
YEAR-BY-YEAR TOTAL RETURNS
(AS OF DECEMBER 31 EACH YEAR)
[BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
'1998' 8.77%
</TABLE>
Best quarter: 5.25% for the
quarter ending
September 30, 1998
Worst quarter: -0.21% for the
quarter ending
December 31, 1998
AVERAGE ANNUAL TOTAL
RETURNS
for the periods ended
December 31, 1998
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION*
<S> <C> <C>
Institutional Shares 8.77% 8.73%
Lehman Brothers Intermediate Corporate Bond Index 8.49% 8.67%
</TABLE>
* February 10, 1997 for Institutional Shares; January 31, 1997 for the Lehman
Brothers Intermediate Corporate Bond Index.
16
- -
<PAGE> 19
INTERMEDIATE CORPORATE
RISK/RETURN SUMMARY BOND PORTFOLIO
The table on the right shows the
fees and expenses that you pay if
you buy and hold Institutional
Shares of the Intermediate
Corporate Bond Portfolio.
FEES AND EXPENSES
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM THE INSTITUTIONAL
PORTFOLIO'S ASSETS) SHARES
<S> <C> <C>
Management Fees .55%
Distribution (12b-1) Fees None
Other Expenses .64%(1)
Total Annual Portfolio Operating Expenses 1.19%(1)
</TABLE>
(1) Other Expenses and Total Annual
Portfolio Operating Expenses for the
Portfolio's Institutional Shares for
the current fiscal year are expected to
be less than the amounts shown above
because certain of the Portfolio's
service providers are voluntarily
waiving a portion of their fees and/or
reimbursing the Portfolio for certain
other expenses. These fee waivers
and/or reimbursements are being made in
order to keep the annual fees and
expenses for the Portfolio's
Institutional Shares at a certain
level. OTHER EXPENSES AND TOTAL ANNUAL
PORTFOLIO OPERATING EXPENSES, AFTER
TAKING THESE FEE WAIVERS AND EXPENSE
REIMBURSEMENTS INTO ACCOUNT, ARE
EXPECTED TO BE .54% AND 1.09%,
RESPECTIVELY, FOR INSTITUTIONAL SHARES.
These fee waivers and expense
reimbursements may be revised or
cancelled at any time.
This example will help you
compare the cost of
investing in the Portfolio
with the cost of investing
in other mutual funds. The
example assumes that you
invest $10,000 for the time
periods shown, reinvest all
of your dividends and
distributions, and then
sell all of your shares at
the end of those periods.
The example also assumes
that your investment has a
5% return each year and the
Portfolio's operating
expenses remain the same.
Although your actual costs
may be higher or lower,
based on these assumptions
your costs would be:
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
INSTITUTIONAL SHARES $121 $378 $654 $1,443
</TABLE>
17
- -
<PAGE> 20
[Scales
Icon]
BOND INDEX
RISK/RETURN SUMMARY PORTFOLIO
INDEXING is a strategy
whereby a Portfolio
attempts to weight its
securities to match
those of a broadly-
based securities index
in an attempt to
approximate the
index's performance.
THE LEHMAN BROTHERS
AGGREGATE BOND INDEX
is an unmanaged index
made up of Lehman Brothers'
Government/Corporate
Bond Index, its
Mortgage Backed Securities
Index and
its Asset Backed
Securities
Index.
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE
The Portfolio's investment objective is to seek to provide
investment results that, before deduction of operating
expenses, approximate the price and yield performance of
U.S. Government, mortgage-backed, asset-backed and corporate
debt securities as represented by the Lehman Brothers
Aggregate Bond Index (the "Lehman Aggregate").
The Portfolio's investment objective can be changed by the
Fund's Board of Directors without shareholder approval.
Shareholders will be given at least 30 days' written notice
before any such change occurs.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio uses an "indexing" strategy through the use of
computer models to approximate the investment performance of
the Lehman Aggregate. The Adviser generally selects
securities for the Portfolio on the basis of their
weightings in the Lehman Aggregate and will only purchase a
security for the Portfolio that is included in the Lehman
Aggregate at the time of such purchase. Because of the large
number of securities listed in the Lehman Aggregate, the
Portfolio cannot invest in all of them. Instead, the
Portfolio holds a representative sample of approximately 100
of the securities in the Lehman Aggregate, selecting one or
two securities to represent an entire "class" or type of
security in the Lehman Aggregate. The Portfolio will invest
substantially all (but not less than 80%) of its total
assets in securities listed in the Lehman Aggregate.
PRINCIPAL RISK CONSIDERATIONS
The prices of debt securities tend to move in the opposite
direction to interest rates. When rates are rising, the
prices of debt securities tend to fall. When rates are
falling, the prices of debt securities tend to rise.
Generally, the longer the time until maturity, the more
sensitive the price of a debt security is to interest rate
changes. Changes in interest rates also may cause certain
debt securities held by the Portfolio, including callable
securities and mortgage-backed securities, to be paid off
much sooner or later than expected. In the event that a
security is paid off sooner than expected because of a
decline in interest rates, the Portfolio may be unable to
recoup all of its initial investment and may also suffer
from having to reinvest in lower-yielding securities. In the
event of a later than expected payment because of a rise in
interest rates, the value of the obligation will decrease,
and the Portfolio may suffer from the inability to invest in
higher-yielding securities.
The value of debt securities also depends on the ability of
issuers to make principal and interest payments. If an
issuer can't meet its payment obligations or if its credit
rating is lowered, the value of its debt securities will
fall.
There is the additional risk that the Portfolio will fail to
match the investment results of the Lehman Aggregate.
</TABLE>
18
- -
<PAGE> 21
BOND INDEX
RISK/RETURN SUMMARY PORTFOLIO
RETURN HISTORY
The bar chart and table on
this page show the
Portfolio's annual returns
and long-term performance,
thereby giving some
indication of the risk of
investing in the Portfolio.
The bar chart shows the
performance of the
Portfolio's Institutional
Shares during the last
calendar year. The table
shows how the Portfolio's
average annual returns for
one year and since
inception compare to those
of the Lehman Aggregate.
Both the bar chart and
table assume reinvestment
of all dividends and
distributions. The
Portfolio's past
performance does not
necessarily indicate how it
will perform in the future.
INSTITUTIONAL SHARES
YEAR-BY-YEAR TOTAL RETURNS
(AS OF DECEMBER 31 EACH YEAR)
[Bar Graph]
<TABLE>
<S> <C>
1998 8.86%
</TABLE>
Best quarter: 4.60% for the
quarter ending
September 30, 1998
Worst quarter: 0.05% for the
quarter ending
December 31, 1998
AVERAGE ANNUAL TOTAL
RETURNS
for the periods ended
December 31, 1998
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION*
<S> <C> <C>
Institutional Shares 8.68% 8.99%
Lehman Brothers Aggregate Bond Index 8.69% 9.67%
</TABLE>
* February 10, 1997 for Institutional Shares; January 31, 1997 for the Lehman
Brothers Aggregate Bond Index.
19
- -
<PAGE> 22
BOND INDEX
RISK/RETURN SUMMARY PORTFOLIO
The table on the right shows the
fees and expenses that you pay if
you buy and hold Institutional
Shares of the Bond Index
Portfolio.
FEES AND EXPENSES
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM THE INSTITUTIONAL
PORTFOLIO'S ASSETS) SHARES
<S> <C> <C>
Management Fees .30%
Distribution (12b-1) Fees None
Other Expenses .63%(1)
Total Annual Portfolio Operating Expenses .93%(1)
</TABLE>
(1) Other Expenses and Total Annual
Portfolio Operating Expenses for the
Portfolio's Institutional Shares for
the current fiscal year are expected to
be less than the amounts shown above
because certain of the Portfolio's
service providers are voluntarily
waiving a portion of their fees and/or
reimbursing the Portfolio for certain
other expenses. These fee waivers
and/or reimbursements are being made in
order to keep the annual fees and
expenses for the Portfolio's
Institutional Shares at a certain
level. OTHER EXPENSES AND TOTAL ANNUAL
PORTFOLIO OPERATING EXPENSES, AFTER
TAKING THESE FEE WAIVERS AND EXPENSE
REIMBURSEMENTS INTO ACCOUNT, ARE
EXPECTED TO BE .52% AND .82%,
RESPECTIVELY, FOR INSTITUTIONAL SHARES.
These fee waivers and expense
reimbursements may be revised or
cancelled at any time.
This example will help you
compare the cost of
investing in the Portfolio
with the cost of investing
in other mutual funds. The
example assumes that you
invest $10,000 for the time
periods shown, reinvest all
of your dividends and
distributions, and then
sell all of your shares at
the end of those periods.
The example also assumes
that your investment has a
5% return each year and the
Portfolio's operating
expenses remain the same.
Although your actual costs
may be higher or lower,
based on these assumptions
your costs would be:
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
INSTITUTIONAL SHARES $95 $296 $515 $1,143
</TABLE>
20
<PAGE> 23
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE
The Portfolio's investment objective is to seek the highest
level of current income consistent with conservation of
capital.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio invests substantially all of its assets in a
broad range of debt obligations, including corporate
obligations and U.S. Government obligations. Corporate
obligations may include bonds, notes and debentures. U.S.
Government obligations may include U.S. Treasury obligations
and obligations of certain U.S. Government agencies. The
Portfolio also invests in mortgage-backed securities,
including Ginnie Maes, Fannie Maes and Freddie Macs.
Although the Portfolio invests primarily in the debt
obligations of U.S. issuers, it may from time to time invest
in U.S. dollar-denominated debt obligations of foreign
corporations and governments.
The Portfolio may only purchase investment grade debt
obligations, which are those rated in one of the four
highest rating categories by one or more national rating
agencies, such as Standard & Poor's Ratings Group or Moody's
Investors Service, Inc. Under normal market conditions,
however, the Portfolio intends to invest at least 65% of its
total assets in debt obligations rated in one of the three
highest rating categories. Unrated debt obligations will be
purchased only if they are determined by the Adviser to be
at least comparable in quality at the time of purchase to
eligible rated securities. Occasionally, the rating of a
security held by the Portfolio may be downgraded below
investment grade. If that happens, the Portfolio does not
have to sell the security unless the Adviser determines that
under the circumstances the security is no longer an
appropriate investment for the Portfolio.
In making investment decisions, the Adviser considers a
number of factors including credit quality, the price of the
security relative to that of other securities in its sector,
current yield, maturity, yield to maturity, anticipated
changes in interest rates and other economic factors,
liquidity, and the overall quality of the investment. The
Portfolio's average weighted maturity will vary from time to
time depending on current market and economic conditions and
the Adviser's assessment of probable changes in interest
rates.
</TABLE>
[Scales
Icon]
GOVERNMENT & CORPORATE
RISK/RETURN SUMMARY BOND PORTFOLIO
21
- -
<PAGE> 24
<TABLE>
<S> <C>
PRINCIPAL RISK CONSIDERATIONS
The prices of debt securities tend to move in the opposite
direction to interest rates. When rates are rising, the
prices of debt securities tend to fall. When rates are
falling, the prices of debt securities tend to rise.
Generally, the longer the time until maturity, the more
sensitive the price of a debt security is to interest rate
changes. Changes in interest rates also may cause certain
debt securities held by the Portfolio, including callable
securities and mortgage-backed securities, to be paid off
much sooner or later than expected. In the event that a
security is paid off sooner than expected because of a
decline in interest rates, the Portfolio may be unable to
recoup all of its initial investment and may also suffer
from having to reinvest in lower-yielding securities. In the
event of a later than expected payment because of a rise in
interest rates, the value of the obligation will decrease,
and the Portfolio may suffer from the inability to invest in
higher-yielding securities.
The value of debt securities also depends on the ability of
issuers to make principal and interest payments. If an
issuer can't meet its payment obligations or if its credit
rating is lowered, the value of its debt securities will
fall.
Foreign investments may be riskier than U.S. investments
because of currency exchange rate volatility, government
restrictions, different accounting standards and political
instability.
The Adviser evaluates the rewards and risks presented by all
securities purchased by the Portfolio and how they may
advance the Portfolio's investment objective. It is
possible, however, that these evaluations will prove to be
inaccurate.
</TABLE>
PORTFOLIO MANAGER
George J. Schupp is
the person primarily
responsible for the
day-to-day management
of the Portfolio. Mr.
Schupp, MVA's Director
of Fixed Income
Management, joined MVA
in 1983 and has 7
years of prior
investment experience.
He has managed the
Portfolio since
February 1998.
GOVERNMENT & CORPORATE
RISK/RETURN SUMMARY BOND PORTFOLIO
22
- -
<PAGE> 25
GOVERNMENT & CORPORATE
RISK/RETURN SUMMARY BOND PORTFOLIO
RETURN HISTORY
The bar chart and table on
this page show the
Portfolio's annual returns
and long-term performance,
thereby giving some
indication of the risk of
investing in the Portfolio.
The bar chart shows how the
performance of the
Portfolio's Institutional
Shares has varied from year
to year. The table shows
how the Portfolio's average
annual returns for one
year, five years, ten years
and since inception compare
to those of a broad-based
market index. Both the bar
chart and table assume
reinvestment of all
dividends and
distributions. The
Portfolio's past
performance does not
necessarily indicate how it
will perform in the future.
KNOW YOUR INDEX
THE LEHMAN BROTHERS
AGGREGATE
BOND INDEX is an unmanaged
index made up of Lehman
Brothers' Government/Corporate
Bond Index, its Mortgage
Backed Securities Index and
its Asset Backed Securities
Index.
INSTITUTIONAL SHARES*
YEAR-BY-YEAR TOTAL RETURNS
(AS OF DECEMBER 31 EACH YEAR)
[BAR GRAPH]
<TABLE>
<S> <C>
'1989' 11.50%
'90' 6.46%
'91' 15.23%
'92' 5.78%
'93' 9.07%
'94' -2.82%
'95' 16.61%
'96' 1.83%
'97' 8.24%
'98' 8.67%
</TABLE>
Best quarter: 6.98% for the
quarter ending June
30, 1989
Worst quarter: -2.79% for the
quarter ending
March 31, 1996
AVERAGE ANNUAL TOTAL
RETURNS
for the periods ended
December 31, 1998
<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION**
<S> <C> <C> <C> <C>
Institutional Shares* 8.67% 6.30% 7.92% 7.74%
Lehman Brothers Aggregate Bond Index 8.69% 7.27% 9.26% 9.08%
</TABLE>
* Institutional Shares of the Portfolio commenced operations on January 3,
1994. Total returns for prior periods reflect the performance of the
Portfolio's Investor A Shares without taking into account the sales charge
payable in connection with purchases of Investor A Shares.
** June 15, 1988 for Investor A Shares; May 31, 1988 for the Lehman Brothers
Aggregate Bond Index.
23
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<PAGE> 26
GOVERNMENT & CORPORATE
RISK/RETURN SUMMARY BOND PORTFOLIO
The table on the right shows
the fees and expenses that
you pay if you buy and hold
Institutional Shares of the
Government & Corporate
Bond Portfolio.
FEES AND EXPENSES
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM THE INSTITUTIONAL
PORTFOLIO'S ASSETS) SHARES
<S> <C> <C>
Management Fees .45%
Distribution (12b-1) Fees None
Other Expenses .61%(1)
Total Annual Portfolio Operating Expenses 1.06%(1)
</TABLE>
(1) Other Expenses and Total Annual
Portfolio Operating Expenses for the
Portfolio's Institutional Shares for
the current fiscal year are expected to
be less than the amounts shown above
because certain of the Portfolio's
service providers are voluntarily
waiving a portion of their fees and/or
reimbursing the Portfolio for certain
other expenses. These fee waivers
and/or reimbursements are being made in
order to keep the annual fees and
expenses for the Portfolio's
Institutional Shares at a certain
level. OTHER EXPENSES AND TOTAL ANNUAL
PORTFOLIO OPERATING EXPENSES, AFTER
TAKING THESE FEE WAIVERS AND EXPENSE
REIMBURSEMENTS INTO ACCOUNT, ARE
EXPECTED TO BE .51% AND .96%,
RESPECTIVELY, FOR INSTITUTIONAL SHARES.
These fee waivers and expense
reimbursements may be revised or
cancelled at any time.
This example will help you
compare the cost of
investing in the Portfolio
with the cost of investing
in other mutual funds. The
example assumes that you
invest $10,000 for the time
periods shown, reinvest all
of your dividends and
distributions, and then sell
all of your shares at the
end of those periods. The
example also assumes that
your investment has a 5%
return each year and the
Portfolio's operating
expenses remain the same.
Although your actual costs
may be higher or lower,
based on these assumptions
your costs would be:
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
INSTITUTIONAL SHARES $108 $337 $585 $1,294
</TABLE>
24
- -
<PAGE> 27
[Scales
Icon]
RISK/RETURN SUMMARY BALANCED PORTFOLIO
TOTAL RETURN consists
of net income
(dividend and/or
interest income from
Portfolio securities,
less expenses of the
Portfolio) and capital
gains and losses, both
realized and
unrealized, from
Portfolio securities.
INVESTMENT GRADE BONDS
are those of medium
credit quality or
better as determined
by a national rating
agency, such as
Standard & Poor's
Ratings Group (bonds
rated BBB or higher)
and Moody's Investors
Service, Inc. (bonds
rated Baa or higher).
The higher the credit
rating, the less
likely it is that the
bond issuer will
default on its
principal and interest
payments.
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE
The Portfolio's investment objective is to maximize total
return through a combination of growth of capital and
current income consistent with the preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio invests in a combination of equity securities
(such as stocks), fixed-income securities (such as bonds)
and money market instruments in weightings the Adviser
believes will offer attractive total returns over time. In
making asset allocation decisions, the Adviser evaluates
forecasts for inflation, interest rates and long-term
corporate earnings growth. The Adviser then examines the
potential effect of these factors on each asset group over a
one- to three-year time period using its own dynamic
computer models. These models show the statistical impact of
the Adviser's economic outlook upon the future returns of
each asset group. The Adviser periodically will increase or
decrease the Portfolio's allocations to equities and
fixed-income securities based on which class appears
relatively more attractive than the other. For example, if
the Adviser expects more rapid economic growth leading to
better corporate earnings, it will increase the Portfolio's
holdings of equity securities and reduce its holdings of
fixed-income securities and money market instruments.
In selecting equity securities, the Adviser considers
historical and projected earnings, the price/earnings
relationship and company growth and asset value. In
selecting fixed income securities, the Adviser seeks those
issues representing the best value among various sectors,
and also considers credit quality, prevailing interest rates
and liquidity.
Under normal market conditions, the Portfolio invests at
least 25% of its total assets in fixed-income securities and
no more than 75% of its total assets in equity securities.
The actual percentages will vary from time to time based on
the Adviser's economic and market outlooks. The Portfolio's
equity securities will consist mainly of common stocks, and
its fixed-income securities will consist mainly of
investment grade bonds, including U.S. Government
securities. Occasionally, the rating of a fixed-income
security held by the Portfolio may be downgraded below
investment grade. If that happens, the Portfolio does not
have to sell the security unless the Adviser determines that
under the circumstances the security is no longer an
appropriate investment for the Portfolio.
</TABLE>
25
- -
<PAGE> 28
<TABLE>
<S> <C>
PRINCIPAL RISK CONSIDERATIONS
The Portfolio invests in stocks and other equity securities,
which may decline in value over short or extended periods of
time. Equity markets tend to be cyclical; there are times
when stock prices generally increase, and other times when
they generally decrease. This could cause the value of your
investment in the Portfolio to fluctuate.
The Portfolio also invests in fixed-income securities, which
lose value when interest rates increase (but increase in
value when interest rates decline). Longer-term fixed-income
securities are more susceptible to these fluctuations in
interest rates than short-term fixed-income securities.
Changes in interest rates may cause certain fixed-income
securities, such as callable securities and mortgage-backed
securities, to be paid off much sooner or later than
expected. In the event that a security is paid off sooner
than expected because of a decline in interest rates, the
Portfolio may be unable to recoup all of its initial
investment and may also suffer from having to reinvest in
lower-yielding securities. In the event of a later than
expected payment because of a rise in interest rates, the
value of the obligation will decrease, and the Portfolio may
suffer from the inability to invest in higher-yielding
securities. Fixed-income securities are subject to other
risks, including the risk that the issuer will be unable to
make payments of principal and interest.
The Adviser evaluates the rewards and risks presented by all
securities purchased by the Portfolio and how they may
advance the Portfolio's investment objective. It is
possible, however, that these evaluations will prove to be
inaccurate.
</TABLE>
PORTFOLIO MANAGER
Peter Merzian, a
senior associate of
MVA, is responsible
for the day-to-day
management of the
Portfolio. He has been
with MVA since 1993
and has managed the
Portfolio since May
1996. He also manages
the Fund's three
municipal bond
portfolios.
RISK/RETURN SUMMARY BALANCED PORTFOLIO
26
- -
<PAGE> 29
RISK/RETURN SUMMARY BALANCED PORTFOLIO
RETURN HISTORY
The bar chart and table on this page
show the Portfolio's annual returns and
long-term performance, thereby giving
some indication of the risk of
investing in the Portfolio. The bar
chart shows how the performance of the
Portfolio's Institutional Shares has
varied from year to year. The table
shows how the Portfolio's average
annual returns for one year, five years
and since inception compare to those of
broad-based market indexes. Both the
bar chart and table assume reinvestment
of all dividends and distributions. The
Portfolio's past performance does not
necessarily indicate how it will
perform in the future.
INSTITUTIONAL SHARES*
YEAR-BY-YEAR TOTAL RETURNS
(AS OF DECEMBER 31 EACH YEAR)
[BAR GRAPH]
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
------------------
<S> <C>
'1994' -2.11%
'95' 25.99%
'96' 11.99%
'97' 18.68%
'98' 11.06%
</TABLE>
KNOW YOUR INDEX
- THE S&P 500 INDEX is an
unmanaged index comprised
of 500 widely held
common stocks listed on
the New York Stock
Exchange, the American
Stock Exchange and NASDAQ.
- THE LEHMAN BROTHERS
AGGREGATE BOND INDEX is
an unmanaged index
made up of Lehman Brothers'
Government/Corporate Bond
Index, its Mortgage Backed
Securities Index and its
Asset Backed Securities
Index.
Best quarter: 10.82% for the
quarter ending
December 31, 1998
Worst quarter: -7.49% for the
quarter ending
September 30, 1998
AVERAGE ANNUAL TOTAL
RETURNS for the periods ended
December 31, 1998
<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS INCEPTION**
<S> <C> <C> <C>
Institutional Shares* 11.06% 12.62% 11.75%
S&P 500 Index 28.60% 24.05% 21.73%
Lehman Brothers Aggregate Bond Index 8.69% 7.27% 7.27%
</TABLE>
* Institutional Shares of the Portfolio commenced operations on January 3,
1994. Total returns for prior periods reflect the performance of the
Portfolio's Investor A Shares without taking into account the sales charge
payable in connection with purchases of Investor A Shares.
** April 1, 1993 for Investor A Shares; May 31, 1993 for the S&P 500 Index
and the Lehman Brothers Aggregate Bond Index.
27
<PAGE> 30
RISK/RETURN SUMMARY BALANCED PORTFOLIO
The table on the right shows
the fees and expenses that you pay
if you buy and hold Institutional
Shares of the Balanced Portfolio.
FEES AND EXPENSES
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM THE INSTITUTIONAL
PORTFOLIO'S ASSETS) SHARES
<S> <C>
Management Fees .75%
Distribution (12b-1) Fees None
Other Expenses .61%(1)
Total Annual Portfolio Operating Expenses 1.36%(1)
</TABLE>
(1) Other Expenses and Total Annual
Portfolio Operating Expenses for the
Portfolio's Institutional Shares for
the current fiscal year are expected to
be less than the amounts shown above
because certain of the Portfolio's
service providers are voluntarily
waiving a portion of their fees and/or
reimbursing the Portfolio for certain
other expenses. These fee waivers
and/or reimbursements are being made in
order to keep the annual fees and
expenses for the Portfolio's
Institutional Shares at a certain
level. OTHER EXPENSES AND TOTAL ANNUAL
PORTFOLIO OPERATING EXPENSES, AFTER
TAKING THESE FEE WAIVERS AND EXPENSE
REIMBURSEMENTS INTO ACCOUNT, WERE ARE
EXPECTED TO BE .52% AND 1.27%,
RESPECTIVELY, FOR INSTITUTIONAL SHARES.
These fee waivers and expense
reimbursements may be revised or
cancelled at any time.
This example will help you
compare the cost of
investing in the Portfolio
with the cost of investing
in other mutual funds. The
example assumes that you
invest $10,000 for the time
periods shown, reinvest all
of your dividends and
distributions, and then
sell all of your shares at
the end of those periods.
The example also assumes
that your investment has a
5% return each year and the
Portfolio's operating
expenses remain the same.
Although your actual costs
may be higher or lower,
based on these assumptions
your costs would be:
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
INSTITUTIONAL SHARES $138 $431 $745 $1,635
</TABLE>
28
<PAGE> 31
[Scales
Icon]
EQUITY INCOME
RISK/RETURN SUMMARY PORTFOLIO
MARKET CAPITALIZATION
is a common measure of
the size of a company.
It is the market price
of a share of the
company's stock
multiplied by the
number of outstanding
shares.
VALUE STOCKS are those
that appear to be
underpriced based on
valuation measures,
such as lower
price-to-earnings and
price-to-book value
ratios.
PORTFOLIO MANAGER
MVA's Equity Committee
is responsible for the
day-to-day management
of the Portfolio. The
Committee has managed
the Portfolio since
1998.
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE
The Portfolio's investment objective is to seek to provide
an above-average level of income consistent with long-term
capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio invests primarily in the common stocks of
value companies with large market capitalizations
(generally, $5 billion or higher). In selecting these
stocks, the Adviser evaluates a number of quantitative
factors, including dividend yield, current and future
earnings potential compared to stock prices and total return
potential. The Adviser also examines other measures of
valuation, including cash flow, asset value and book value.
Under normal market conditions, the Portfolio invests at
least 65% of its total assets in income-producing
(dividend-paying) equity securities, primarily common
stocks. These stocks generally will be listed on a national
stock exchange or will be unlisted stocks with established
over-the-counter markets. Many such stocks may offer
above-average levels of income as compared to the S&P 500
Index.
PRINCIPAL RISK CONSIDERATIONS
The Portfolio invests in stocks and other equity securities,
which may decline in value over short or extended periods of
time. Equity markets tend to be cyclical; there are times
when stock prices generally increase, and other times when
they generally decrease. This could cause the value of your
investment in the Portfolio to fluctuate. In addition, the
Portfolio is subject to the additional risk that the value
stocks it typically holds may not perform as well as other
types of stocks, such as growth stocks.
The Adviser evaluates the rewards and risks presented by all
securities purchased by the Portfolio and how they may
advance the Portfolio's investment objective. It is
possible, however, that these evaluations will prove to be
inaccurate.
</TABLE>
29
<PAGE> 32
EQUITY INCOME
RISK/RETURN SUMMARY PORTFOLIO
RETURN HISTORY
The bar chart and table on this page
show the Portfolio's annual returns and
long-term performance, thereby giving
some indication of the risk of
investing in the Portfolio. The bar
chart shows the performance of the
Portfolio's Institutional Shares during
the last calendar year. The table shows
how the Portfolio's average annual
returns for one year and since
inception compare to those of a
broad-based market index. Both the bar
chart and table assume reinvestment of
all dividends and distributions. The
Portfolio's past performance does not
necessarily indicate how it will
perform in the future.
INSTITUTIONAL SHARES
YEAR-BY-YEAR TOTAL RETURNS
(AS OF DECEMBER 31 EACH YEAR)
[BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
'1998' 10.06%
</TABLE>
KNOW YOUR INDEX
THE RUSSELL 1000 VALUE
INDEX is an unmanaged
index that measures the
performance of the stocks
in the Russell 1000 Index
with less than average
growth orientation.
Companies in this Index
generally have low price
to book and price/
earnings ratios, higher
dividend yields and lower
forecasted growth values.
The Russell 1000 Index
consists of the 1,000
largest U.S. companies as
ranked by total market
capitalization.
Best quarter: 14.33% for the
quarter ending June
30, 1997
Worst quarter: -8.75% for the
quarter ending
September 30, 1998
AVERAGE ANNUAL TOTAL
RETURNS
for the periods ended
December 31, 1998
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION*
<S> <C> <C>
Institutional Shares 10.06% 17.22%
Russell 1000 Value Index 15.63% 23.26%
</TABLE>
* February 27, 1997 for Institutional Shares; February 28, 1997 for the
Russell 1000 Value Index.
30
<PAGE> 33
EQUITY INCOME
RISK/RETURN SUMMARY PORTFOLIO
The table on the right shows the
fees and expenses that you pay if
you buy and hold Institutional
Shares of the Equity Income
Portfolio.
FEES AND EXPENSES
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM THE INSTITUTIONAL
PORTFOLIO'S ASSETS) SHARES
<S> <C>
Management Fees .75%
Distribution (12b-1) Fees None
Other Expenses .57%(1)
Total Annual Portfolio Operating Expenses 1.32%(1)
</TABLE>
(1) Other Expenses and Total Annual
Portfolio Operating Expenses for the
Portfolio's Institutional Shares for
the current fiscal year are expected to
be less than the amounts shown above
because certain of the Portfolio's
service providers are voluntarily
waiving a portion of their fees and/or
reimbursing the Portfolio for certain
other expenses. These fee waivers
and/or reimbursements are being made in
order to keep the annual fees and
expenses for the Portfolio's
Institutional Shares at a certain
level. OTHER EXPENSES AND TOTAL ANNUAL
PORTFOLIO OPERATING EXPENSES, AFTER
TAKING THESE FEE WAIVERS AND EXPENSE
REIMBURSEMENTS INTO ACCOUNT, ARE
EXPECTED TO BE .52% AND 1.27%,
RESPECTIVELY, FOR INSTITUTIONAL SHARES.
These fee waivers and expense
reimbursements may be revised or
cancelled at any time.
This example will help you
compare the cost of
investing in the Portfolio
with the cost of investing
in other mutual funds. The
example assumes that you
invest $10,000 for the time
periods shown, reinvest all
of your dividends and
distributions, and then sell
all of your shares at the
end of those periods. The
example also assumes that
your investment has a 5%
return each year and the
Portfolio's operating
expenses remain the same.
Although your actual costs
may be higher or lower,
based on these assumptions
your costs would be:
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
INSTITUTIONAL SHARES $134 $418 $723 $1,590
</TABLE>
31
<PAGE> 34
[Scales
Icon]
EQUITY INDEX
RISK/RETURN SUMMARY PORTFOLIO
INDEXING is a strategy
whereby a Portfolio
attempts to weight its
securities to match
those of a broadly-
based securities index
in an attempt to
approximate the
index's performance.
The S&P 500 INDEX is
an unmanaged index
comprised of 500
widely held common
stocks listed on the
New York Stock
Exchange, the American
Stock Exchange and
NASDAQ.
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE
The Portfolio's investment objective is to seek to provide
investment results that, before the deduction of operating
expenses, approximate the price and yield performance of
U.S. publicly traded common stocks with large stock market
capitalizations, as represented by the Standard & Poor's 500
Index (the "S&P 500 Index").
The Portfolio's investment objective can be changed by the
Fund's Board of Directors without shareholder approval.
Shareholders will be given at least 30 days' written notice
before any such change occurs.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio uses an "indexing" strategy through the use of
computer models to approximate the investment performance of
the S&P 500 Index. The Portfolio invests substantially all
(at least 80%) of its total assets in securities listed in
the S&P 500 Index and typically will hold all 500 stocks
represented in the Index. In general, each stock's
percentage weighting in the Portfolio is based on its
weighting in the Index. When stocks are removed from or
added to the Index, those changes are reflected in the
Portfolio. The Portfolio periodically "rebalances" its
holdings as dictated by changes in shareholder purchase and
redemption activity and in the composition of the S&P 500
Index.
PRINCIPAL RISK CONSIDERATIONS
The Portfolio invests in stocks and other equity securities,
which may decline in value over short or extended periods of
time. Equity markets tend to be cyclical; there are times
when stock prices generally increase, and other times when
they generally decrease. This could cause the value of your
investment in the Portfolio to fluctuate. In addition, the
Portfolio is subject to the additional risk that the
large-capitalization stocks it typically holds may not
perform as well as other types of stocks, such as
small-capitalization stocks.
There is the additional risk that the Portfolio's investment
results may fail to match those of the S&P 500 Index.
</TABLE>
32
<PAGE> 35
EQUITY INDEX
RISK/RETURN SUMMARY PORTFOLIO
RETURN HISTORY
The bar chart and table on this page
show the Portfolio's annual returns and
long-term performance, thereby giving
some indication of the risk of
investing in the Portfolio. The bar
chart shows the performance of the
Portfolio's Institutional Shares during
the last calendar year. The table shows
how the Portfolio's average annual
returns for one year and since
inception compare to those of the S&P
500 Index. Both the bar chart and table
assume reinvestment of all dividends
and distributions. The Portfolio's past
performance does not necessarily
indicate how it will perform in the
future.
INSTITUTIONAL SHARES
YEAR-BY-YEAR TOTAL RETURNS
(AS OF DECEMBER 31 EACH YEAR)
[BAR GRAPH]
<TABLE>
<CAPTION>
<S> <C>
'1998' 27.92%
</TABLE>
Best quarter: 21.04% for the
quarter ending
December 31, 1998
Worst quarter: -9.96% for the
quarter ending
September 30, 1998
AVERAGE ANNUAL TOTAL
RETURNS
for the periods ended
December 31, 1998
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION*
<S> <C> <C>
Institutional Shares 27.92% 30.83%
S&P 500 Index 28.60% 31.31%
</TABLE>
* May 1, 1997 for Institutional Shares; April 30, 1997 for the S&P 500 Index.
33
<PAGE> 36
EQUITY INDEX
RISK/RETURN SUMMARY PORTFOLIO
The table on the right shows the
fees and expenses that you pay if
you buy and hold Institutional
Shares of the Equity Index
Portfolio.
FEES AND EXPENSES
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM THE INSTITUTIONAL
PORTFOLIO'S ASSETS) SHARES
<S> <C> <C>
Management Fees .30%
Distribution (12b-1) Fees None
Other Expenses .73%(1)
Total Annual Portfolio Operating Expenses 1.03%(1)
</TABLE>
(1) Other Expenses and Total Annual
Portfolio Operating Expenses for the
Portfolio's Institutional Shares for
the current fiscal year are expected to
be less than the amounts shown above
because certain of the Portfolio's
service providers are voluntarily
waiving a portion of their fees and/or
reimbursing the Portfolio for certain
other expenses. These fee waivers
and/or reimbursements are being made in
order to keep the annual fees and
expenses for the Portfolio's
Institutional Shares at a certain
level. OTHER EXPENSES AND TOTAL ANNUAL
PORTFOLIO OPERATING EXPENSES, AFTER
TAKING THESE FEE WAIVERS AND EXPENSE
REIMBURSEMENTS INTO ACCOUNT, ARE
EXPECTED TO BE .55% AND .85%,
RESPECTIVELY, FOR INSTITUTIONAL SHARES.
These fee waivers and expense
reimbursements may be revised or
cancelled at any time.
This example will help you
compare the cost of
investing in the Portfolio
with the cost of investing
in other mutual funds. The
example assumes that you
invest $10,000 for the time
periods shown, reinvest all
of your dividends and
distributions, and then sell
all of your shares at the
end of those periods. The
example also assumes that
your investment has a 5%
return each year and the
Portfolio's operating
expenses remain the same.
Although your actual costs
may be higher or lower,
based on these assumptions
your costs would be:
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
INSTITUTIONAL SHARES $105 $328 $569 $1,259
</TABLE>
34
<PAGE> 37
[Scales
Icon]
GROWTH & INCOME
RISK/RETURN SUMMARY EQUITY PORTFOLIO
PORTFOLIO MANAGER
MVA's Equity Committee
is responsible for the
day-to-day management
of the Portfolio. The
Committee has managed
the Portfolio since
1998.
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE
The Portfolio's investment objective is to provide long-term
capital growth, with income a secondary consideration.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio invests primarily in common stocks. The
Adviser selects stocks based on a number of factors related
to historical and projected earnings and the price/earnings
relationship as well as company growth and asset value,
consistency of earnings growth and earnings quality.
Stocks purchased for the Portfolio generally will be listed
on a national stock exchange or will be unlisted securities
with an established over-the-counter market. These stocks
tend to pay dividends, so many of the Portfolio's
investments may produce some income. Nevertheless, income is
not the primary factor in the stock selection process.
PRINCIPAL RISK CONSIDERATIONS
The Portfolio invests in stocks and other equity securities,
which may decline in value over short or extended periods of
time. Equity markets tend to be cyclical; there are times
when stock prices generally increase, and other times when
they generally decrease. This could cause the value of your
investment in the Portfolio to fluctuate.
The Adviser evaluates the rewards and risks presented by all
securities purchased by the Portfolio and how they may
advance the Portfolio's investment objective. It is
possible, however, that these evaluations will prove to be
inaccurate.
</TABLE>
35
<PAGE> 38
RETURN HISTORY
The bar chart and table on
this page show the
Portfolio's annual returns
and long-term performance,
thereby giving some
indication of the risk of
investing in the Portfolio.
The bar chart shows how the
performance of the
Portfolio's Institutional
Shares has varied from year
to year. The table shows
how the Portfolio's average
annual returns for one
year, five years, ten years
and since inception compare
to those of a broad-based
market index. Both the bar
chart and table assume
reinvestment of all
dividends and
distributions. The
Portfolio's past
performance does not
necessarily indicate how it
will perform in the future.
KNOW YOUR INDEX
THE S&P 500 INDEX is an
unmanaged
index comprised of 500
widely held
common stocks listed on the
New York Stock Exchange,
the
American Stock Exchange
and NASDAQ.
GROWTH & INCOME
RISK/RETURN SUMMARY EQUITY PORTFOLIO
INSTITUTIONAL SHARES*
YEAR-BY-YEAR TOTAL RETURNS
(AS OF DECEMBER 31 EACH YEAR)
(STATED IN PERCENTAGES)
<TABLE>
<CAPTION>
GROWTH & INCOME EQUITY PORTFOLIO
--------------------------------
<S> <C>
'1989' 26.81
'90' -1.42
'91' 26.66
'92' 10.61
'93' 9.61
'94' -0.44
'95' 33.98
'96' 19.04
'97' 27.22
'98' 12.74
</TABLE>
<TABLE>
<S> <C>
Best quarter: 18.11% for the quarter ending
December 31, 1998
Worst quarter: -14.41% for the quarter ending
September 30, 1998
</TABLE>
AVERAGE ANNUAL TOTAL
RETURNS
for periods ended December
31, 1998
<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION**
<S> <C> <C> <C> <C>
Institutional Shares* 12.74% 17.89% 15.89% 15.59%
S&P 500 Index 28.60% 24.05% 19.19% 18.93%
</TABLE>
* Institutional Shares of the Portfolio commenced operations on January 3,
1994. Total returns for prior periods reflect the performance of the
Portfolio's Investor A Shares without taking into account the sales charge
payable in connection with purchases of Investor A Shares.
** June 2, 1988 for Investor A Shares; May 31, 1988 for the S&P 500 Index.
36
- -
<PAGE> 39
GROWTH & INCOME
RISK/RETURN SUMMARY EQUITY PORTFOLIO
The table on the right shows the
fees and expenses that you pay if
you buy and hold Institutional
Shares of the Growth & Income
Equity Portfolio.
FEES AND EXPENSES
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM THE INSTITUTIONAL
PORTFOLIO'S ASSETS) SHARES
<S> <C>
Management Fees .55%
Distribution (12b-1) Fees None
Other Expenses .59%(1)
Total Annual Portfolio Operating Expenses 1.14%(1)
</TABLE>
(1) Other Expenses and Total Annual
Portfolio Operating Expenses for the
Portfolio's Institutional Shares for
the current fiscal year are expected to
be less than the amounts shown above
because certain of the Portfolio's
service providers are voluntarily
waiving a portion of their fees and/or
reimbursing the Portfolio for certain
other expenses. These fee waivers
and/or reimbursements are being made in
order to keep the annual fees and
expenses for the Portfolio's
Institutional Shares at a certain
level. OTHER EXPENSES AND TOTAL ANNUAL
PORTFOLIO OPERATING EXPENSES, AFTER
TAKING THESE FEE WAIVERS AND EXPENSE
REIMBURSEMENTS INTO ACCOUNT, ARE
EXPECTED TO BE .49% AND 1.04%,
RESPECTIVELY, FOR INSTITUTIONAL SHARES.
These fee waivers and expense
reimbursements may be revised or
cancelled at any time.
This example will help you
compare the cost of
investing in the Portfolio
with the cost of investing
in other mutual funds. The
example assumes that you
invest $10,000 for the time
periods shown, reinvest all
of your dividends and
distributions, and then sell
all of your shares at the
end of those periods. The
example also assumes that
your investment has a 5%
return each year and the
Portfolio's operating
expenses remain the same.
Although your actual costs
may be higher or lower,
based on these assumptions
your costs would be:
EXAMPLE
<TABLE>
<S> <C> <C> <C> <C> <C>
1 3 5 10
YEAR YEARS YEARS YEARS
INSTITUTIONAL SHARES $116 $362 $628 $1,386
</TABLE>
37
<PAGE> 40
[Scales GROWTH EQUITY
Icon] PORTFOLIO
RISK/RETURN SUMMARY
GROWTH STOCKS offer
strong revenue and
earnings potential and
accompanying capital
growth, with less
dividend income than
value stocks.
PORTFOLIO MANAGER
MVA's Equity Committee
is responsible for the
day-to-day management
of the Portfolio. The
Committee has managed
the Portfolio since
1998.
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE
The Portfolio's investment objective is capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio invests primarily in the common stocks of
growth companies. In selecting securities for the Portfolio,
the Adviser evaluates a company's earnings history and the
risk and volatility of the company's business. The Adviser
also considers other factors, such as product position and
the ability to increase market share, but the ability to
increase company earnings is the primary consideration.
Under normal market conditions, the Portfolio invests at
least 65% of its total assets in common stocks or other
equity securities, such as preferred stocks, convertible
securities and warrants. Typically, the Portfolio's stocks
are those of large- and medium-capitalization companies that
are listed on the New York Stock Exchange, the American
Stock Exchange or NASDAQ.
PRINCIPAL RISK CONSIDERATIONS
The Portfolio invests in stocks and other equity securities,
which may decline in value over short or extended periods of
time. Equity markets tend to be cyclical; there are times
when stock prices generally increase, and other times when
they generally decrease. This could cause the value of your
investment in the Portfolio to fluctuate. In addition, the
Portfolio is subject to the additional risk that the growth
stocks it typically holds may not perform as well as other
types of stocks, such as value stocks.
The Adviser evaluates the rewards and risks presented by all
securities purchased by the Portfolio and how they may
advance the Portfolio's investment objective. It is
possible, however, that these evaluations will prove to be
inaccurate.
</TABLE>
38
<PAGE> 41
RETURN HISTORY+
The bar chart and table
below show the Portfolio's
annual returns and
long-term performance,
thereby giving some
indication of the risk of
investing in the Portfolio.
The bar chart shows how the
performance of the
Portfolio's Institutional
Shares has varied from year
to year. The table shows
how the Portfolio's average
annual returns for one
year, five years and since
inception compare to those
of a broad-based market
index. Both the bar chart
and table assume
reinvestment of dividends
and distributions. The
Portfolio's past
performance does not
necessarily indicate how it
will perform in the future.
KNOW YOUR INDEX
THE S&P 500 INDEX is an
unmanaged
index comprised of 500
widely held
common stocks listed on the
New York Stock Exchange,
the
American Stock Exchange
and NASDAQ.
GROWTH EQUITY
RISK/RETURN SUMMARY PORTFOLIO
INSTITUTIONAL SHARES*
YEAR-BY-YEAR TOTAL RETURNS
(AS OF DECEMBER 31 EACH YEAR)
[GROWTH EQUITY PORTFOLIO BAR GRAPH]
<TABLE>
<CAPTION>
GROWTH EQUITY PORTFOLIO
-----------------------
<S> <C>
'1994' -2.06
'95' 44.17
'96' 17.49
'97' 26.95
'98' 29.46
</TABLE>
<TABLE>
<S> <C>
Best quarter: 25.09% for the quarter ending
December 31, 1998
Worst quarter: -11.85% for the quarter ending
September 30, 1998
</TABLE>
AVERAGE ANNUAL TOTAL
RETURNS
for the periods ended
December 31, 1998
<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS INCEPTION**
<S> <C> <C> <C>
Institutional Shares* 29.46% 22.21% 18.24%
S&P 500 Index 28.60% 21.73% 21.60%
</TABLE>
+ The Portfolio commenced operations on January 4, 1993 as the Arrow Equity
Portfolio, a separate investment portfolio (the "Predecessor Portfolio")
of Arrow Funds. On November 21, 1997, the Predecessor Portfolio was
reorganized as a new portfolio of the Fund. Prior to the reorganization,
the Predecessor Portfolio offered and sold shares that were similar to the
Fund's Investor A Shares.
* Institutional Shares of the Portfolio commenced operations on December 2,
1997. Total returns for the period November 21, 1997 to December 2, 1997
reflect the performance of the Portfolio's Investor A Shares without
taking into account the sales charge payable in connection with purchases
of Investor A Shares. Total returns for periods prior to November 21, 1997
reflect the performance of the Predecessor Portfolio.
** January 4, 1993 for the Predecessor Portfolio; December 31, 1992 for the
S&P 500 Index.
39
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<PAGE> 42
GROWTH EQUITY
RISK/RETURN SUMMARY PORTFOLIO
The table on the right shows the
fees and expenses that you pay if
you buy and hold Institutional
Shares of the Growth Equity
Portfolio.
FEES AND EXPENSES
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM INSTITUTIONAL
THE PORTFOLIO'S ASSETS) SHARES
<S> <C> <C>
Management Fees .75%
Distribution (12b-1) Fees None
Other Expenses .69%(1)
Total Annual Portfolio Operating
Expenses 1.44%(1)
</TABLE>
(1)Other Expenses and Total Annual
Portfolio Operating Expenses for the
Portfolio's Institutional Shares for the
current fiscal year are expected to be
less than the amounts shown above
because certain of the Portfolio's
service providers are voluntarily
waiving a portion of their fees and/or
reimbursing the Portfolio for certain
other expenses. These fee waivers and/or
reimbursements are being made in order
to keep the annual fees and expenses for
the Portfolio's Institutional Shares at
a certain level. OTHER EXPENSES AND
TOTAL ANNUAL PORTFOLIO OPERATING
EXPENSES, AFTER TAKING THESE FEE WAIVERS
AND EXPENSE REIMBURSEMENTS INTO ACCOUNT,
ARE EXPECTED TO BE .52% AND 1.27%,
RESPECTIVELY, FOR INSTITUTIONAL SHARES.
These fee waivers and expense
reimbursements may be revised or
cancelled at any time.
This example will help you
compare the cost of
investing in the Portfolio
with the cost of investing
in other mutual funds. The
example assumes that you
invest $10,000 for the time
periods shown, reinvest all
of your dividends and
distributions, and then
sell all of your shares at
the end of those periods.
The example also assumes
that your investment has a
5% return each year and the
Portfolio's operating
expenses remain the same.
Although your actual costs
may be higher or lower,
based on these assumptions
your costs would be:
EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES $147 $456 $787 $1,724
</TABLE>
40
- -
<PAGE> 43
[Open Hand
Icon]
RISK/RETURN SUMMARY SMALL CAP
EQUITY PORTFOLIO
PORTFOLIO MANAGER
Robert J. Anthony,
Senior Associate at
MVA, is responsible
for the day-to-day
management of the
Portfolio. He has been
with MVA for 25 years
and has managed the
Portfolio since its
inception in 1992.
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE
The Portfolio's investment objective is capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES
Under normal conditions, the Portfolio invests at least 65%
of its total assets in common stocks of small- to
medium-sized companies with market capitalizations from $100
million to $2 billion at the time of purchase and which the
Adviser believes have above-average prospects for capital
appreciation. Stocks purchased by the Portfolio may be
listed on a national securities exchange or may be unlisted
securities with or without an established over-the-counter
market.
The Portfolio also may invest a portion of its assets in
larger companies that the Adviser believes offer improved
growth possibilities because of rejuvenated management,
product changes or other developments likely to stimulate
earnings or asset growth. The Portfolio also may invest in
stocks the Adviser believes are undervalued or in initial
public offerings (IPOs) of new companies that demonstrate
the potential for price appreciation. The Adviser selects
stocks based on a number of factors, including historical
and projected earnings, asset value, potential for price
appreciation and earnings growth, and quality of the
products manufactured or services offered.
PRINCIPAL RISK CONSIDERATIONS
The Portfolio invests in stocks and other equity securities,
which may decline in value over short or extended periods of
time. Equity markets tend to be cyclical; there are times
when stock prices generally increase, and other times when
they generally decrease. This could cause the value of your
investment in the Portfolio to fluctuate.
Compared to larger-capitalization stocks,
small-capitalization stocks tend to carry greater risk and
exhibit greater price volatility because their businesses
may not be well-established. In addition, some smaller
companies may have specialized or limited product lines,
markets or financial resources and may be dependent on
one-person management. All of these factors increase risk
and may result in more significant losses than the other
Mercantile Stock Portfolios. In an effort to reduce the
risks inherent in smaller-company stocks, the Portfolio's
holdings are diversified over a number of companies and
industry groups.
The Adviser evaluates the rewards and risks presented by all
securities purchased by the Portfolio and how they may
advance the Portfolio's investment objective. It is
possible, however, that these evaluations will prove to be
inaccurate.
</TABLE>
41
- -
<PAGE> 44
RETURN HISTORY
The bar chart and table on
this page show the
Portfolio's annual returns
and long-term performance,
thereby giving some
indication of the risk of
investing in the Portfolio.
The bar chart shows how the
performance of the
Portfolio's Institutional
Shares has varied from year
to year. The table shows
how the Portfolio's average
annual returns for one
year, five years and since
inception compare to those
of a broad-based market
index. Both the bar chart
and the table assume
reinvestment of all
dividends and
distributions. The
Portfolio's past
performance does not
necessarily indicate how it
will perform in the future.
KNOW YOUR INDEX
THE RUSSELL 2000 INDEX is
an unmanaged index
comprised of the 2,000
smallest of the 3,000
largest U.S. companies
based on market
capitalization.
SMALL CAP
RISK/RETURN SUMMARY EQUITY PORTFOLIO
INSTITUTIONAL SHARES*
YEAR-BY-YEAR TOTAL RETURNS
(AS OF DECEMBER 31 EACH YEAR)
(STATED IN PERCENTAGES)
<TABLE>
<CAPTION>
SMALL CAP EQUITY PORTFOLIO
--------------------------
<S> <C>
'1993' 23.58
'94' 2.11
'95' 16.9
'96' 10.61
'97' 26.56
'98' -8.05
</TABLE>
<TABLE>
<S> <C>
Best quarter: 18.55% for the quarter ending
December 31, 1992
Worst quarter: -24.69% for the quarter ending
September 30, 1998
</TABLE>
AVERAGE ANNUAL TOTAL
RETURNS
for the periods ended
December 31, 1998
<TABLE>
<CAPTION>
SINCE
1 YEAR 5 YEARS INCEPTION**
<S> <C> <C> <C>
Institutional Shares* (8.05)% 7.91% 11.82%
Russell 2000 Index (2.55)% 11.87% 13.86%
</TABLE>
* Institutional Shares of the Portfolio commenced operations on January 3,
1994. Total returns for prior periods reflect the performance of the
Portfolio's Investor A Shares without taking into account the sales charge
payable in connection with purchases of Investor A Shares.
** May 6, 1992 for Investor A Shares; April 30, 1992 for the Russell 2000
Index.
42
- -
<PAGE> 45
RISK/RETURN SUMMARY SMALL CAP
EQUITY PORTFOLIO
The table on the right shows
the fees and expenses that you pay
if you buy and hold Institutional
Shares of the Small Cap Equity
Portfolio.
FEES AND EXPENSES
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM THE INSTITUTIONAL
PORTFOLIO'S ASSETS) SHARES
<S> <C> <C>
Management Fees .75%
Distribution (12b-1) Fees None
Other Expenses .60%(1)
Total Annual Portfolio Operating Expenses 1.35%(1)
</TABLE>
(1) Other Expenses and Total Annual
Portfolio Operating Expenses for the
Portfolio's Institutional Shares for
the current fiscal year are expected to
be less than the amounts shown above
because certain of the Portfolio's
service providers are voluntarily
waiving a portion of their fees and/or
reimbursing the Portfolio for certain
other expenses. These fee waivers
and/or reimbursements are being made in
order to keep the annual fees and
expenses for the Portfolio's
Institutional Shares at a certain
level. OTHER EXPENSES AND TOTAL ANNUAL
PORTFOLIO OPERATING EXPENSES, AFTER
TAKING THESE FEE WAIVERS AND EXPENSE
REIMBURSEMENTS INTO ACCOUNT, ARE
EXPECTED TO BE .50% AND 1.25%,
RESPECTIVELY, FOR INSTITUTIONAL SHARES.
These fee waivers and expense
reimbursements may be revised or
cancelled at any time.
This example will help you
compare the cost of
investing in the Portfolio
with the cost of investing
in other mutual funds. The
example assumes that you
invest $10,000 for the time
periods shown, reinvest all
of your dividends and
distributions, and then
sell all of your shares at
the end of those periods.
The example also assumes
that your investment has a
5% return each year and the
Portfolio's operating
expenses remain the same.
Although your actual costs
may be higher or lower,
based on these assumptions
your costs would be:
EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C> <C>
INSTITUTIONAL SHARES $137 $428 $739 $1,624
</TABLE>
43
- -
<PAGE> 46
[Open Hand
Icon] SMALL CAP EQUITY
INDEX PORTFOLIO
RISK/RETURN SUMMARY
INDEXING is a strategy whereby a Portfolio attempts to weight its securities to
match those of a broadly- based securities index in an attempt to approximate
the index's performance.
THE S&P SMALLCAP 600 INDEX is an unmanaged index that tracks the performance of
600 domestic companies traded on the New York Stock Exchange, American Stock
Exchange and NASDAQ. The S&P SmallCap 600 Index is heavily weighted with the
stocks of small companies.
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE
The Portfolio's investment objective is to provide
investment results that, before deduction of operating
expenses, approximate the price and yield performance of
U.S. common stocks with smaller stock market
capitalizations, as represented by the S&P SmallCap 600
Index.
The Portfolio's investment objective can be changed by the
Fund's Board of Directors without shareholder approval.
Shareholders will be given at least 30 days' written notice
before any such change occurs.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio uses an "indexing" strategy through the use of
computer models to approximate the investment performance of
the S&P SmallCap 600 Index. The Portfolio will invest at
least 80% of its total assets in securities listed in the
S&P SmallCap 600 Index and typically will hold all 600
stocks represented in the Index. Under certain
circumstances, however, the Portfolio may not hold all 600
stocks in the Index because of shareholder activity or
changes in the Index. In general, each stock's percentage
weighting in the Portfolio is based on its weighting in the
S&P SmallCap 600 Index. When stocks are removed from or
added to the Index, those changes are reflected in the
Portfolio. The Portfolio periodically "rebalances" its
holdings as dictated by changes in shareholder purchase and
redemption activity, and in the composition of the S&P
SmallCap 600 Index.
PRINCIPAL RISK CONSIDERATIONS
The Portfolio invests in stocks and other equity securities,
which may decline in value over short or extended periods of
time. Equity markets tend to be cyclical; there are times
when stock prices generally increase, and other times when
they generally decrease. This could cause the value of your
investment in the Portfolio to fluctuate.
In addition, the Portfolio is subject to the additional risk
that the small-capitalization stocks that it holds may not
perform as well as other types of stocks. Compared to
larger-capitalization stocks, small-capitalization stocks
tend to carry greater risk and exhibit greater price
volatility because their businesses may not be
well-established. In addition, some smaller companies may
have specialized or limited product lines, markets or
financial resources and may be dependent on one-person
management. All of these factors increase risk and may
result in more significant losses than the other Mercantile
Stock Portfolios. By typically investing in all 600 stocks
in the Index, the Portfolio remains broadly diversified,
which may reduce some of this risk. There is the additional
risk that the Portfolio's investment results may fail to
match those of the S&P SmallCap 600 Index.
RETURN HISTORY
The Portfolio does not have a long-term performance record
because it has been in operation for less than one calendar
year.
</TABLE>
44
- -
<PAGE> 47
SMALL CAP EQUITY
INDEX PORTFOLIO
RISK/RETURN SUMMARY
The table on the right shows the fees and expenses that you pay if you buy and
hold shares of the Small Cap Equity Index Portfolio.
FEES AND EXPENSES
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM THE INSTITUTIONAL
PORTFOLIO'S ASSETS) SHARES
<S> <C> <C>
Management Fees 0.40%
Distribution (12b-1) Fees None
Other Expenses 0.79%(1)
Total Annual Portfolio Operating Expenses 1.19%(1)
</TABLE>
(1) Other Expenses and Total Annual
Portfolio Operating Expenses for the
Portfolio's Institutional Shares for
the current fiscal year are expected to
be less than the amounts shown above
because certain of the Portfolio's
service providers are voluntarily
waiving a portion of their fees and/or
reimbursing the Portfolio for certain
other expenses. These fee waivers
and/or reimbursements are being made in
order to keep the annual fees and
expenses for the Portfolio's
Institutional Shares at a certain
level. OTHER EXPENSES AND TOTAL ANNUAL
PORTFOLIO OPERATING EXPENSES, AFTER
TAKING THESE FEE WAIVERS AND EXPENSE
REIMBURSEMENTS INTO ACCOUNT, ARE
EXPECTED TO BE .62% AND 1.02%,
RESPECTIVELY, FOR INSTITUTIONAL SHARES.
These fee waivers and expense
reimbursements may be revised or
cancelled at any time.
This example will help you compare the cost of investing in the Portfolio with
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 for the time periods shown, reinvest all of your dividends and
distributions, and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and the
Portfolio's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C> <C>
INSTITUTIONAL SHARES $121 $378 $654 $1,443
</TABLE>
45
- -
<PAGE> 48
[Open Hand
Icon]
RISK/RETURN SUMMARY INTERNATIONAL EQUITY
PORTFOLIO
SUB-ADVISER/ PORTFOLIO MANAGER MVA has appointed Clay Finlay, Inc. ("Clay
Finlay" or the "Sub-Adviser") as sub- adviser to assist in the day-to- day
management of the Portfolio. Frances Dakers, a principal and senior portfolio
manager of Clay Finlay, is responsible for the management of the Portfolio. Ms.
Dakers has been with Clay Finlay since January 1982 and has managed the
Portfolio since it began operations in 1994.
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE
The Portfolio's investment objective is to provide capital
growth consistent with reasonable investment risk.
PRINCIPAL INVESTMENT STRATEGIES
The Portfolio invests primarily in foreign common stocks,
most of which will be denominated in foreign currencies.
During normal market conditions, the Portfolio will invest
substantially all (at least 80%) of its total assets in the
securities of companies that derive more than 50% of their
gross revenues outside the United States or have more than
50% of their assets outside the United States. Under normal
market conditions, the Portfolio invests in equity
securities from at least three foreign countries. Generally,
at least 50% of the Portfolio's total assets will be
invested in securities of companies located either in the
developed countries of Western Europe or in Japan. The
Portfolio also may invest in other developed countries and
in countries with emerging markets or economies.
By investing in various foreign stocks, the Portfolio
attempts to achieve broad diversification and to take
advantage of differences between economic trends and the
performance of securities markets in different countries,
regions and geographic areas. In selecting stocks, the Sub-
Adviser uses a screening tool to determine which companies
represent the best values relative to their long-term growth
prospects and local markets. The Sub-Adviser also uses
fundamental analysis by evaluating balance sheets, market
share and strength of management.
PRINCIPAL RISK CONSIDERATIONS
Investing in foreign companies involves different risks than
investing in U.S. companies due to such factors as currency
exchange rate volatility, government restrictions, different
accounting standards and political instability. The
multinational character of the Portfolio's investments
should reduce the effect that events in any one country or
geographic area will have on overall performance. However,
negative results from one foreign market may offset gains
from another market or may negatively affect other foreign
markets. The risks associated with foreign investments are
heightened when investing in emerging markets. The
governments and economies of emerging market countries
feature greater instability than those of more developed
countries. Such investments tend to fluctuate in price more
widely and to be less liquid than other foreign investments.
As with U.S. equity markets, foreign markets tend to be
cyclical. There are times when stock prices generally
increase, and other times when they generally decrease.
The Adviser evaluates the rewards and risks presented by all
securities purchased by the Portfolio and how they may
advance the Portfolio's investment objective. It is
possible, however, that these evaluations will prove to be
inaccurate.
</TABLE>
46
- -
<PAGE> 49
INTERNATIONAL EQUITY
RISK/RETURN SUMMARY PORTFOLIO
RETURN HISTORY
The bar chart and table on this page show the Portfolio's annual returns and
long-term performance, thereby giving some indication of the risk of investing
in the Portfolio. The bar chart shows how the performance of the Portfolio's
Institutional Shares has varied from year to year. The table shows how the
Portfolio's average annual returns for one year and since inception compare to
those of a broad-based market index. Both the bar chart and table assume
reinvestment of all dividends and distributions. The Portfolio's past
performance does not necessarily indicate how it will perform in the future.
INSTITUTIONAL SHARES
YEAR-BY-YEAR TOTAL RETURNS
(AS OF DECEMBER 31 EACH YEAR)
(STATED IN PERCENTAGES)
[BAR CHART]
<TABLE>
<CAPTION>
<S> <C>
1995 9.21%
96 10.00%
97 4.70%
98 17.39%
</TABLE>
<TABLE>
<S> <C>
Best quarter: 19.38% for the quarter ending
December 31, 1998
Worst quarter: -17.15% for the quarter ending
September 30, 1998
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
for the periods ending
December 31, 1998
KNOW YOUR INDEX
THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE, AUSTRALASIA AND FAR EAST INDEX,
OR EAFE INDEX, is an unmanaged index consisting of companies in Australia, New
Zealand, Europe and the Far East.
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION*
<S> <C> <C>
Institutional Shares 17.39% 8.58%
EAFE Index 18.23% 7.25%
</TABLE>
* April 4, 1994 for Institutional Shares; March 31, 1994 for the EAFE Index.
47
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<PAGE> 50
RISK/RETURN SUMMARY
INTERNATIONAL EQUITY
PORTFOLIO
The table on the right shows the fees and expenses that you pay if you buy and
hold Institutional Shares of the International Equity Portfolio.
FEES AND EXPENSES
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM THE INSTITUTIONAL
PORTFOLIO'S ASSETS) SHARES
<S> <C> <C>
Management Fees 1.00%
Distribution (12b-1) Fees None
Other Expenses .75%(1)
Total Annual Portfolio Operating Expenses 1.75%(1)
</TABLE>
(1) Other Expenses and Total Annual
Portfolio Operating Expenses for the
Portfolio's Institutional Shares for
the current year are expected to be
less than the amounts shown above
because certain of the Portfolio's
service providers are voluntarily
waiving a portion of their fees and/or
reimbursing the Portfolio for certain
other expenses. These fee waivers
and/or reimbursements are being made in
order to keep the annual fees and
expenses for the Portfolio's
Institutional Shares at a certain
level. OTHER EXPENSES AND TOTAL ANNUAL
PORTFOLIO OPERATING EXPENSES, AFTER
TAKING THESE FEE WAIVERS AND EXPENSE
REIMBURSEMENTS INTO ACCOUNT, ARE
EXPECTED TO BE .58% AND 1.58%
RESPECTIVELY, FOR INSTITUTIONAL SHARES.
These fee waivers and expense
reimbursements may be revised or
cancelled at any time.
This example will help you compare the cost of investing in the Portfolio with
the cost of investing in other mutual funds. The example assumes that you invest
$10,000 for the time periods shown, reinvest all of your dividends and
distributions, and then sell all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and the
Portfolio's operating expenses remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C> <C>
INSTITUTIONAL SHARES $178 $551 $949 $2,062
</TABLE>
48
- -
<PAGE> 51
[Open Hand
Icon]
RISK/RETURN SUMMARY ADDITIONAL INFORMATION ON RISK
The principal risks of investing in each Portfolio are described on the
previous pages. The following supplements that discussion.
SECURITIES LENDING
To obtain interest income, each Portfolio may lend its securities to
broker-dealers, banks or institutional borrowers pursuant to agreements
requiring that the loans be continuously secured by collateral equal at all
times in value to at least the market value of the securities loaned. There
is the risk that, when lending portfolio securities, the securities may not
be available to the Portfolio on a timely basis. Therefore, the Portfolio may
lose the opportunity to sell the securities at a desirable price.
Additionally, in the event that a borrower of securities would file for
bankruptcy or become insolvent, disposition of the securities may be delayed
pending court action.
TEMPORARY DEFENSIVE POSITIONS
Each Portfolio may temporarily hold investments that are not part of its main
investment strategy to try to avoid losses during unfavorable market
conditions. These investments may include cash (which will not earn any
income). In addition, each of the Taxable Bond and Stock Portfolios may hold
money market instruments, including short-term debt securities issued or
guaranteed by the U.S. Government or its agencies, and the International
Equity Portfolio may hold debt obligations of U.S. companies having their
principal business activities in the U.S. This strategy could prevent a
Portfolio from achieving its investment objective and, if utilized by a Stock
Portfolio, could reduce the Portfolio's return and affect its performance
during a market upswing.
OTHER TYPES OF INVESTMENTS
This prospectus describes each Portfolio's principal investment strategies
and the particular types of securities in which each Portfolio principally
invests. Each Portfolio may, from time to time, make other types of
investments and pursue other investment strategies in support of its overall
investment goal. These supplemental investment strategies -- and the risks
involved -- are described in detail in the Statement of Additional
Information ("SAI"), which is referred to on the back cover of this
prospectus.
YEAR 2000 RISKS
As with other mutual funds, financial and business organizations and
individuals around the world, the Portfolios could be adversely affected if
the computer systems used by the Adviser and the Portfolios' other service
providers do not properly process and calculate date-related information and
data from and after January 1, 2000. This possibility is commonly known as
the Year 2000 or "Y2K" problem. The Adviser is taking steps to address the
Y2K problem with respect to the computer systems that it uses and to obtain
assurances that comparable steps are being taken by the Portfolios' other
major service providers. At this time, however, there can be no assurance
that these steps will be sufficient to avoid any adverse impact on the
Portfolios. The Y2K problem could have a negative impact on the issuers of
securities in which the Portfolios invest, which could hurt the Portfolios'
investment returns.
49
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<PAGE> 52
[Open Hand
Icon]
YOUR ACCOUNT EXPLANATION OF SALES PRICE
BUSINESS DAYS DEFINED
A business day is any day that both the New York Stock Exchange and the Federal
Reserve Bank of St. Louis are open for business. Currently, the Fund observes
the following holidays: New Year's Day, Martin Luther King Jr. Day, Presidents'
Day, Good Friday, Memorial Day (observed), Independence Day (observed), Labor
Day, Columbus Day, Veterans' Day, Thanksgiving and Christmas.
<TABLE>
<S> <C>
Institutional Shares of the Portfolios are sold at their net
asset value (NAV). The NAV for each class of shares of a
Money Market Portfolio is determined as of 12:00 noon
(Eastern time) and as of the close of regular trading on the
New York Stock Exchange (currently 4:00 p.m., Eastern time)
on every business day. The NAV for each class of shares of a
Taxable Bond or Stock Portfolio is determined as of the
close of regular trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time) on every business day.
The NAV for a class of shares is determined by adding the
value of a Portfolio's investments, cash and other assets
attributable to a particular share class, subtracting the
Portfolio's liabilities attributable that class and then
dividing the result by the total number of shares in the
class that are outstanding.
- The investments of each of the Money Market Portfolios are
valued at amortized cost, which is approximately equal to
market value.
- The investments of each of the Taxable Bond and Stock
Portfolios are valued according to market value. When a
market quote is not readily available, the security's
value is based on "fair value" as determined by MVA (or
Clay Finlay, with respect to the International Equity
Portfolio) under the supervision of the Fund's Board of
Directors. Foreign securities acquired by the
International Equity Fund may be valued in foreign markets
on days when the Portfolio's NAV is not calculated. In
such cases, the NAV of the Portfolio's shares may be
significantly affected on days when investors cannot buy
and sell Portfolio shares.
- A properly placed purchase order (see "How to Buy Shares"
on page 51) that is delivered to the Fund by 12:00 noon
(Eastern time) on any business day with respect to the
Treasury Money Market Portfolio or by 3:00 p.m. (Eastern
time) on any business day with respect to the Money Market
Portfolio receives the share price next determined if the
Fund receives payment in federal funds or other
immediately available funds by 4:00 p.m. (Eastern time)
that day. If payment is not received by that time, the
order will be cancelled. A properly placed purchase order
that is delivered to the Fund after 12:00 noon (Eastern
time) with respect to the Treasury Money Market Portfolio
or after 3:00 p.m. (Eastern time) with respect to the
Money Market Portfolio will be placed the following
business day.
- A properly placed purchase order (see "How to Buy Shares"
on page 51) for one of the Taxable Bond or Stock Portfolios
that is delivered to the Fund before 4:00 p.m. (Eastern
time) on any business day receives the share price
determined as of 4:00 p.m. that day. If the order is
received after 4:00 p.m., it will receive the price
determined on the next business day. Your financial
institution must forward your payment to the Fund no later
than 4:00 p.m. the next business day after placing the
order, or the order will be cancelled.
</TABLE>
50
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<PAGE> 53
Institutional Shares of the Portfolios are sold to financial institutions,
such as banks, trust companies and thrift institutions, that are purchasing
shares on behalf of discretionary and non-discretionary accounts for which
they do not receive account level asset-based management fees.
If you are purchasing Institutional Shares through a financial institution,
you must follow the procedures established by your institution. Your
financial institution is responsible for sending your purchase order to the
Fund's distributor and wiring payment to the Fund's custodian. Your financial
institution holds the shares in your name and receives all confirmations of
purchases and sales. Financial institutions placing orders for themselves or
on behalf of their customers should call the Fund at 1-800-452-2724.
The Fund does not have any minimum investment requirement for Institutional
Shares, but your financial institution may do so. They may also charge
transaction fees and require you to maintain a minimum account balance.
YOUR ACCOUNT HOW TO BUY SHARES
51
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<PAGE> 54
Orders to sell or "redeem" Institutional Shares should be placed with the
same financial institution that placed the original purchase order in
accordance with the procedures established by that institution. Your
financial institution is responsible for sending your order to the Fund's
distributor and for crediting your account with the proceeds. The Fund does
not currently charge for wiring the proceeds, but your financial institution
may do so.
If the shares being sold are represented by share certificates, then the
order to sell must be made in writing and mailed to: Mercantile Mutual Funds,
Inc., P.O. Box 78069 -- Tram 001/128/41-6, St. Louis, Missouri 63178. The
order must be accompanied by the share certificates, properly endorsed for
transfer. Additional documents may be required for certain types of
shareholders, such as corporations, partnerships, executors, trustees,
administrators or guardians.
The Fund's transfer agent may require a signature guarantee unless the
redemption proceeds are payable to the shareholder of record and the proceeds
are either mailed to the shareholder's address of record or electronically
transferred to the account designated on the original account application. A
signature guarantee helps prevent fraud, and you may obtain one from most
banks and broker/dealers. Contact the Fund for more information on signature
guarantees.
Institutional Shares will be sold at the NAV next determined after the Fund
accepts an order (see above). If the order to sell is received and accepted
by the Fund before 12:00 noon (Eastern time) on a business day with respect
to the Treasury Money Market Portfolio or before 3:00 p.m. (Eastern time) on
a business day with respect to the Money Market Portfolio, the proceeds are
sent electronically the same day to the financial institution that placed the
order. If the order to sell is received and accepted by the Fund after 12:00
noon (Eastern time) on a business day with respect to the Treasury Money
Market Portfolio or after 3:00 p.m. (Eastern time) on a business day with
respect to the Money Market Portfolio, or on a non-business day, the proceeds
normally are sent electronically to the financial institution on the next
business day.
Proceeds from redemptions from the Taxable Bond and Stock Portfolios
ordinarily are sent electronically to your financial institution the next
business day as long as the Fund receives your order by 4:00 p.m. (Eastern
time) on a business day.
YOUR ACCOUNT HOW TO SELL SHARES
52
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<PAGE> 55
HOW TO EXCHANGE SHARES
The exchange privilege enables shareholders to exchange Institutional Shares
of one Portfolio for Institutional Shares of another Portfolio. Contact your
financial institution or the Fund's distributor for additional information on
the exchange privilege. The exchange privilege may be exercised only in those
states where Institutional Shares of the Portfolio being acquired may be
legally sold.
ADMINISTRATIVE SERVICES FEES
Institutional Shares of the Portfolios pay administrative services fees at an
annual rate of up to 0.25% of each Money Market Portfolio's and up to 0.30%
of each Taxable Bond and Stock Portfolio's Institutional Share assets. These
fees are paid to financial institutions that provide certain administrative
services to their customers who own Institutional Shares.
GENERAL TRANSACTION POLICIES
The Fund reserves the right to:
- Refuse any order to buy shares.
- Reject any exchange request.
- Redeem all shares in an account if the balance falls below $500. If,
within 60 days of the Fund's written request, the account balance has not
been increased, a shareholder may be required to redeem all shares. The
Fund will not require a shareholder to redeem shares if the value of the
account drops below $500 due to fluctuations in net asset value.
- Send redemption proceeds within seven days after receiving a request, if
an earlier payment could adversely affect a Portfolio.
- Modify or terminate the exchange privilege after 60 days' written notice
to shareholders.
- Make a "redemption in kind." Under abnormal conditions that may make
payment in cash unwise, the Fund may offer partial or complete payment in
portfolio securities rather than cash at such securities'
then-market-value equal to the redemption price. In such cases, a
shareholder may incur brokerage costs in converting these securities to
cash.
Shareholders may be responsible for any fraudulent telephone orders as long
as the Fund has taken reasonable precautions to verify the shareholder's
identity. Shareholders who experience difficulty getting through to the Fund
by telephone because of unusual market conditions should consider selling or
exchanging their shares by mail.
YOUR ACCOUNT
53
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<PAGE> 56
DIVIDENDS AND DISTRIBUTIONS
[-] MONEY MARKET PORTFOLIOS
Each Money Market Portfolio declares dividends from net investment
income daily and pays them monthly. Although the Portfolios do not
expect to realize net long-term capital gains, any capital gains
realized would be distributed at least annually.
[-] TAXABLE BOND PORTFOLIOS
Each Taxable Bond Portfolio declares dividends from net investment
income daily and pays them monthly. Capital gains, if any, are
distributed at least once a year. It's expected that each Portfolio's
annual distribution will be primarily income dividends.
[-] STOCK PORTFOLIOS
The Balanced, Equity Income, Equity Index, Growth & Income Equity and
Growth Equity Portfolios declare and pay dividends from net investment
income monthly. The Small Cap Equity, Small Cap Equity Index and
International Equity Portfolios declare and pay dividends from net
investment income quarterly. Capital gains, if any, for all of the
Portfolios are distributed at least once a year. It's expected that each
Portfolio's annual distributions will normally -- but not
always -- consist primarily of capital gains and not ordinary income.
[-] ALL PORTFOLIOS
Dividends on each share class of a Portfolio are determined in the same
manner and are paid in the same amount. However, each share class bears
all expenses associated with that particular class.
All of your dividends and capital gains distributions with respect to a
particular Portfolio will be reinvested in additional shares of the same
class unless you or your financial institution instruct otherwise on
your account application or have redeemed all shares you held in the
Portfolio. In such cases, dividends and distributions will be paid in
cash.
[Open Hand
Icon]
DISTRIBUTIONS AND TAXES
54
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<PAGE> 57
DISTRIBUTIONS AND TAXES
You will be advised at
least annually
regarding the federal
income tax treatment
of dividends and
distributions made to
you. You should save
your account
statements because
they contain
information you will
need to calculate your
capital gains or
losses upon your
ultimate sale or
exchange of shares in
the Portfolios.
TAXATION
As with any investment, you should consider the tax
implications of an investment in the Portfolios. The
following is only a brief summary of some of the
important tax considerations generally affecting the
Portfolios and their shareholders under current law,
which may be subject to change in the future.
Consult your tax adviser with specific reference to
your own tax situation.
The Portfolios' distributions generally will be
taxable to shareholders as ordinary income and
capital gains (which may be taxable at different
rates depending on the length of time each Portfolio
held the relevant assets). You will be subject to
income tax on these distributions whether they are
paid in cash or reinvested in additional shares.
If you purchase shares just prior to a distribution,
the purchase price will reflect the amount of the
upcoming distribution, but you will be taxed on the
entire amount of the distribution received even
though, as an economic matter, the distribution
simply constitutes a return of capital. This is
known as "buying into a dividend."
You will recognize a taxable gain or loss on a sale,
exchange or redemption of your shares, including an
exchange for shares of another Portfolio, based on
the difference between your tax basis in the shares
and the amount you receive for them. Any loss
realized on shares held for six months or less will
be treated as a long-term capital loss to the extent
that any capital gains distributions were received
on the shares.
Distributions on, and sales, exchanges and
redemptions of, shares held in an IRA or other
tax-qualified plan will not be currently taxable.
The International Equity Portfolio is expected to be
subject to foreign withholding taxes with respect to
dividends or interest received from sources in
foreign countries. The Portfolio may make an
election to treat a proportionate amount of such
taxes as a distribution to each shareholder. This
would allow each shareholder to either (1) credit
such proportionate amount of taxes against U.S.
federal income tax liability; or (2) take such
amount as an itemized deduction.
The Treasury Money Market Portfolio is designed to
provide shareholders, to the extent permitted by
federal law, with income that is exempt or excluded
from taxation at the state or local level. Please
consult your tax adviser as to the status of
distributions by the Portfolio in your state.
For more information regarding the taxation of the
Portfolios, consult the SAI under the heading
"Additional Information Concerning Taxes." You also
should consult your tax adviser for information
regarding state and local tax consequences and the
applicability of any foreign taxes or U.S.
withholding taxes with respect to your specific
situation.
55
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<PAGE> 58
THE ADVISER
MVA, subject to the general supervision of the Fund's Board of Directors, is
responsible for the day-to-day management of the Portfolios in accordance
with each Portfolio's respective investment objective and policies. This
includes making investment decisions, buying and selling securities and
overseeing the administration and recordkeeping for each Portfolio.
In exchange for these services, MVA receives an investment advisory fee,
which is calculated daily and paid monthly, according to the average daily
net assets of each Portfolio. For the fiscal year ended November 30, 1998,
the Portfolios paid MVA advisory fees as follows:
<TABLE>
<CAPTION>
INVESTMENT ADVISORY FEES
PORTFOLIO AS A % OF NET ASSETS
<S> <C>
------------------------------
Treasury Money Market Portfolio .35%
------------------------------
Money Market Portfolio .35%
------------------------------
U.S. Government Securities Portfolio .45%
------------------------------
Intermediate Corporate Bond Portfolio .35%
------------------------------
Bond Index Portfolio .24%
------------------------------
Government & Corporate Bond Portfolio .45%
------------------------------
Balanced Portfolio .75%
------------------------------
Equity Income Portfolio .62%
------------------------------
Equity Index Portfolio .23%
------------------------------
Growth & Income Equity Portfolio .55%
------------------------------
Growth Equity Portfolio .75%
------------------------------
Small Cap Equity Portfolio .75%
------------------------------
Small Cap Equity Index Portfolio* .40%
------------------------------
International Equity Portfolio 1.00%
</TABLE>
<TABLE>
<S> <C>
-----------------------------------------------------------------------------
</TABLE>
* The Portfolio commenced operations on December 30, 1998 and the fee
shown is that which currently is in effect.
THE SUB-ADVISER
Clay Finlay, Inc., an experienced international investment manager, serves as
sub-adviser to the International Equity Portfolio and is responsible for the
management of the Portfolio's assets. Clay Finlay manages the Portfolio under
the guidance and direction of MVA and according to its sub-advisory agreement
with MVA. For its services, Clay Finlay receives from MVA a monthly fee based
on a percentage of the Portfolio's average daily net assets.
Founded in 1982, Clay Finlay is a registered investment adviser and a
wholly-owned subsidiary of United Asset Management Corporation, a financial
services holding company. Clay Finlay's principal office is located at 200
Park Avenue, 56th Floor, New York, NY 10166.
[Open Book
Icon]
MANAGEMENT OF THE FUND
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<PAGE> 59
INTRODUCTION
The financial highlights tables presented below are intended to help you
understand the financial performance of each Portfolio's Institutional Shares
for the past five years (or, if shorter, the period since the Portfolio began
operations or the particular shares were first offered). Certain information
reflects financial results for a single Institutional Share in each
Portfolio. The total returns in the tables represent the rate that an
investor would have earned (or lost) on an investment in Institutional
Shares, assuming reinvestment of all dividends and distributions. This
information has been audited by KPMG LLP, independent auditors, whose report,
along with the Portfolios' financial statements, are included in the Fund's
Annual Report to Shareholders, and are incorporated by reference into the
SAI. The Small Cap Equity Index Portfolio did not conduct investment
operations during the periods covered by the tables.
[Open Hand
Icon]
FINANCIAL HIGHLIGHTS
57
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<PAGE> 60
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED NOVEMBER 30, JANUARY 26, 1995 TO
1998 1997 1996 NOVEMBER 30, 1995(a)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income 0.043 0.044 0.044 0.042
-----------------------------------------------------------------------------------------
Total from Investment Activities 0.043 0.044 0.044 0.042
-----------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.043) (0.044) (0.044) (0.042)
-----------------------------------------------------------------------------------------
Total Distributions (0.043) (0.044) (0.044) (0.042)
-----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------------------------------------------------
Total Return 4.40% 4.53% 4.46% 4.94%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 236 $ 233 $ 299 $ 28
Ratio of expenses to average net
assets 0.81% 0.77% 0.79% 0.92%(c)
Ratio of net investment income to
average net assets 4.30% 4.44% 4.39% 5.76%(c)
Ratio of expenses to average net
assets* 0.96% 0.92% 0.94% 1.07%(c)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
(a) Period from commencement of operations.
(b) Represents the total return for Investor A Shares from December 1, 1994
to January 25, 1995 plus the total return for Institutional Shares from
January 26, 1995 to November 30, 1995.
(c) Annualized.
FINANCIAL HIGHLIGHTS TREASURY MONEY MARKET PORTFOLIO
58
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<PAGE> 61
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income 0.048 0.048 0.047 0.052 0.033
-------------------------------------------------------------------------------------------
Total from Investment Activities 0.048 0.048 0.047 0.052 0.033
-------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.048) (0.048) (0.047) (0.052) (0.033)
-------------------------------------------------------------------------------------------
Total Distributions (0.048) (0.048) (0.047) (0.052) (0.033)
-------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------------------------------------------
Total Return 4.95% 4.93% 4.81% 5.33% 3.34%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $28,536 $22,022 $15,921 $13,340 $10,295
Ratio of expenses to average net
assets 0.78% 0.77% 0.78% 0.77% 0.78%
Ratio of net investment income to
average net assets 4.84% 4.83% 4.70% 5.20% 3.48%
Ratio of expenses to average net
assets* 0.93% 0.92% 0.93% 0.92% 0.95%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
(a) On January 3, 1994, the Portfolio issued a new series of Shares which
were designated as "Institutional" Shares. The financial highlights
presented for periods prior to January 3, 1994 represent the financial
highlights applicable to Investor Shares.
FINANCIAL HIGHLIGHTS MONEY MARKET PORTFOLIO
59
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<PAGE> 62
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.58 $ 10.64 $10.82 $10.02 $11.20
---------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income 0.57 0.56 0.62 0.63 0.61
Net realized and unrealized gains
(losses) from investments 0.12 (0.04) (0.15) 0.80 (1.00)
---------------------------------------------------------------------------------------
Total from Investment Activities 0.69 0.52 0.47 1.43 (0.39)
---------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.57) (0.58) (0.62) (0.63) (0.61)
In excess of net realized gains -- -- (0.03) -- (0.18)
---------------------------------------------------------------------------------------
Total Distributions (0.57) (0.58) (0.65) (0.63) (0.79)
---------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.70 $ 10.58 $10.64 $10.82 $10.02
---------------------------------------------------------------------------------------
Total Return 6.67% 5.10% 4.55% 14.69% (3.46)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $6,140 $ 7,049 $2,232 $ 667 $ 51
Ratio of expenses to average net
assets 0.97% 0.97% 0.96% 0.97% 0.95%
Ratio of net investment income to
average net assets 5.34% 5.52% 5.75% 5.91% 6.54%
Ratio of expenses to average net
assets* 1.07% 1.07% 1.06% 1.07% 1.16%
Portfolio Turnover** 54.57% 100.33% 53.76% 93.76% 50.00%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
** Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(a) On June 7, 1994, the Portfolio issued a new series of Shares which were
designated as "Institutional" Shares. The financial highlights presented
for periods prior to June 7, 1994 represent the financial highlights
applicable to Investor Shares.
FINANCIAL HIGHLIGHTS U.S. GOVERNMENT SECURITIES PORTFOLIO
60
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<PAGE> 63
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED FEBRUARY 10, 1997 TO
NOVEMBER 30, 1998 NOVEMBER 30, 1997(a)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.11 $10.00
--------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income 0.61 0.53
Net realized and unrealized gains from
investments 0.29 0.11
--------------------------------------------------------------------------------------------------
Total from Investment Activities 0.90 0.64
--------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.61) (0.53)
Net realized gains (0.11) --
--------------------------------------------------------------------------------------------------
Total Distributions (0.72) (0.53)
--------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.29 $10.11
--------------------------------------------------------------------------------------------------
Total Return 9.32% 6.60%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $1,124 $ 27
Ratio of expenses to average net assets 1.07% 0.29%(c)
Ratio of net investment income to average net
assets 5.72% 7.06%(c)
Ratio of expenses to average net assets* 1.18% 1.31%(c)
Portfolio Turnover** 9.65% 61.98%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
** Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
FINANCIAL HIGHLIGHTS INTERMEDIATE CORPORATE BOND PORTFOLIO
61
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<PAGE> 64
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED FEBRUARY 10, 1997 TO
NOVEMBER 30, 1998 NOVEMBER 30, 1997(a)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.17 $10.00
--------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income 0.62 0.53
Net realized and unrealized gains from
investments 0.31 0.17
--------------------------------------------------------------------------------------------------
Total from Investment Activities 0.93 0.70
--------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.62) (0.53)
Net realized gains (0.03) --
--------------------------------------------------------------------------------------------------
Total Distributions (0.65) (0.53)
--------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.45 $10.17
--------------------------------------------------------------------------------------------------
Total Return 9.47% 7.20%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at the end of period (000) $7,034 $ 27
Ratio of expenses to average net assets 0.79% 0.24%(c)
Ratio of net investment income to average net
assets 5.77% 7.09%(c)
Ratio of expenses to average net assets* 0.91% 0.95%(c)
Portfolio Turnover** 33.37% 46.16%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
** Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
FINANCIAL HIGHLIGHTS BOND INDEX PORTFOLIO
62
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<PAGE> 65
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.37 $ 10.34 $ 10.53 $ 9.64 $10.65
-----------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income 0.57 0.56 0.64 0.61 0.60
Net realized and unrealized gains
(losses) from Investments 0.37 0.03 (0.19) 0.89 (0.94)
-----------------------------------------------------------------------------------------
Total from Investment Activities 0.94 0.59 0.45 1.50 (0.34)
-----------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.57) (0.56) (0.64) (0.61) (0.60)
In excess of net realized gains -- -- -- -- (0.07)
-----------------------------------------------------------------------------------------
Total Distributions (0.57) (0.56) (0.64) (0.61) (0.67)
-----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.74 $ 10.37 $ 10.34 $10.53 $ 9.64
-----------------------------------------------------------------------------------------
Total Return 9.30% 6.00% 4.51% 15.98% (3.32)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $20,835 $16,954 $14,875 $9,413 $5,965
Ratio of expenses to average net
assets 0.96% 0.95% 0.95% 0.95% 0.96%
Ratio of net investment income to
average net assets 5.41% 5.55% 6.06% 6.01% 6.03%
Ratio of expenses to average net
assets* 1.06% 1.05% 1.05% 1.05% 1.07%
Portfolio Turnover** 91.14% 140.72% 149.20% 59.32% 50.00%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
** Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between classes of shares issued.
(a) On January 3, 1994, the Portfolio issued a new series of Shares which
were designated as "Institutional" Shares. The financial highlights
presented for periods prior to January 3, 1994 represent the financial
highlights applicable to Investor Shares.
FINANCIAL HIGHLIGHTS GOVERNMENT & CORPORATE BOND PORTFOLIO
63
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<PAGE> 66
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.23 $ 12.54 $ 11.62 $ 9.60 $ 10.22
-------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income 0.28 0.31 0.32 0.31 0.28
Net realized and unrealized gains
(losses) from investments 0.83 1.49 1.34 2.02 (0.48)
-------------------------------------------------------------------------------------------
Total from Investment Activities 1.11 1.80 1.66 2.33 (0.20)
-------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.28) (0.37) (0.32) (0.31) (0.29)
In excess of net investment income -- (0.03) -- -- --
Net realized gains (1.47) (0.71) (0.42) -- --
In excess of net realized gains -- -- -- -- (0.13)
-------------------------------------------------------------------------------------------
Total Distributions (1.75) (1.11) (0.74) (0.31) (0.42)
-------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 12.59 $ 13.23 $ 12.54 $ 11.62 $ 9.60
-------------------------------------------------------------------------------------------
Total Return 9.38% 15.52% 15.08% 24.67% (2.00)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $70,962 $61,655 $54,731 $36,827 $22,723
Ratio of expenses to average net
assets 1.26% 1.27% 1.27% 1.27% 1.27%
Ratio of net investment income to
average net assets 2.23% 2.56% 2.78% 2.97% 2.77%
Ratio of expenses to average net
assets* 1.36% 1.37% 1.37% 1.37% 1.40%
Portfolio Turnover** 47.79% 43.60% 85.16% 58.16% 49.00%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
** Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(a) On January 3, 1994, the Portfolio issued a new series of Shares which
were designated as "Institutional" Shares. The financial highlights
presented for periods prior to January 3, 1994 represent the financial
highlights applicable to Investor Shares.
FINANCIAL HIGHLIGHTS BALANCED PORTFOLIO
64
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<PAGE> 67
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED MARCH 7, 1997 TO
NOVEMBER 30, 1998 NOVEMBER 30, 1997(a)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.56 $10.00
--------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income 0.18 0.19
Net realized and unrealized gains from
investments 0.98 1.56
--------------------------------------------------------------------------------------------------
Total from Investment Activities 1.16 1.75
--------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.19) (0.19)
Net realized gains (2.29) --
--------------------------------------------------------------------------------------------------
Total Distributions (2.48) (0.19)
--------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.24 $11.56
--------------------------------------------------------------------------------------------------
Total Return 11.82% 17.64%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 35 $ 1
Ratio of expenses to average net assets 1.23% 0.37%(c)
Ratio of net investment income to average net
assets 1.40% 2.34%(c)
Ratio of expenses to average net assets* 1.32% 1.60%(c)
Portfolio Turnover** 98.32% 48.33%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
** Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
FINANCIAL HIGHLIGHTS EQUITY INCOME PORTFOLIO
65
- -
<PAGE> 68
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED MAY 1, 1997 TO
NOVEMBER 30, 1998 NOVEMBER 30, 1997(a)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.94 $ 10.00
--------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income 0.10 0.10
Net realized and unrealized gains from
investments 2.63 1.94
--------------------------------------------------------------------------------------------------
Total from Investment Activities 2.73 2.04
--------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.11) (0.10)
Net realized gains (0.02) --
--------------------------------------------------------------------------------------------------
Total Distributions (0.13) (0.10)
--------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.54 $ 11.94
--------------------------------------------------------------------------------------------------
Total Return 23.01% 20.40%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $10,944 $ 8
Ratio of expenses to average net assets 0.91% 0.46%(c)
Ratio of net investment income to average net
assets 0.63% 1.30%(c)
Ratio of expenses to average net assets* 1.03% 1.19%(c)
Portfolio Turnover** 14.83% 1.66%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
** Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
FINANCIAL HIGHLIGHTS EQUITY INDEX PORTFOLIO
66
- -
<PAGE> 69
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.12 $ 18.67 $ 16.29 $ 12.70 $ 14.74
---------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income 0.12 0.12 0.20 0.23 0.20
Net realized and unrealized gains
(losses) from investments 1.58 3.95 3.33 3.74 (0.17)
---------------------------------------------------------------------------------------
Total from Investment Activities 1.70 4.07 3.53 3.97 0.03
---------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.11) (0.13) (0.20) (0.24) (0.21)
In excess of net investment income (0.01) (0.03) (0.01) -- --
Net realized gains (3.57) (1.46) (0.94) (0.14) (0.18)
In excess of net realized gains -- -- -- -- (1.68)
---------------------------------------------------------------------------------------
Total Distributions (3.69) (1.62) (1.15) (0.38) (2.07)
---------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 19.13 $ 21.12 $ 18.67 $ 16.29 $ 12.70
---------------------------------------------------------------------------------------
Total Return 9.36% 23.90% 23.08% 31.88% 0.19%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $107,133 $92,515 $72,950 $40,228 $21,897
Ratio of expenses to average net
assets 1.04% 1.04% 1.05% 1.05% 1.05%
Ratio of net investment income to
average net assets 0.60% 0.60% 1.19% 1.58% 1.41%
Ratio of expenses to average net
assets* 1.14% 1.14% 1.15% 1.15% 1.16%
Portfolio Turnover** 91.23% 57.11% 63.90% 58.50% 65.00%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
** Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(a) On January 3, 1994, the Portfolio issued a new series of Shares which
were designated as "Institutional" Shares. The financial highlights
presented for periods prior to January 3, 1994 represent the financial
highlights applicable to Investor Shares.
FINANCIAL HIGHLIGHTS GROWTH & INCOME EQUITY PORTFOLIO
67
- -
<PAGE> 70
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
DECEMBER 2, 1997 TO
NOVEMBER 30, 1998(a)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.27
-------------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment loss (0.04)
Net realized and unrealized gains from
investments 3.70
-------------------------------------------------------------------------------------------------
Total from Investment Activities 3.66
-------------------------------------------------------------------------------------------------
DISTRIBUTIONS
In excess of net investment income (0.01)
-------------------------------------------------------------------------------------------------
Total Distributions (0.01)
-------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 19.92
-------------------------------------------------------------------------------------------------
Total Return 19.56%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000) $ 7,720
Ratio of expenses to average net assets 1.36%(c)
Ratio of net investment loss to average net
assets (0.28)%(c)
Ratio of expenses to average net assets* 1.46%(c)
Portfolio Turnover** 54.33%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
** Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(a) Period from initial public investment.
(b) Not annualized.
(c) Annualized.
FINANCIAL HIGHLIGHTS GROWTH EQUITY PORTFOLIO
68
- -
<PAGE> 71
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.98 $ 13.36 $ 13.40 $ 11.96 $ 13.14
-------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment loss (0.07) (0.04) (0.01) (0.01) (0.03)
Net realized and unrealized gains
(losses) from Investments (1.87) 2.48 1.03 2.36 0.86
-------------------------------------------------------------------------------------------
Total from Investment Activities (1.94) 2.44 1.02 2.35 0.83
-------------------------------------------------------------------------------------------
DISTRIBUTIONS
In excess of net investment income -- -- (0.01) -- --
Net realized gains (1.19) (0.82) (1.05) (0.91) (1.78)
In excess of net realized gains (0.03) -- -- -- (0.23)
-------------------------------------------------------------------------------------------
Total Distributions (1.22) (0.82) (1.06) (0.91) (2.01)
-------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.82 $ 14.98 $ 13.36 $ 13.40 $ 11.96
-------------------------------------------------------------------------------------------
Total Return (14.17)% 19.41% 8.39% 21.43% 7.11%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $25,037 $34,395 $30,081 $17,620 $ 5,633
Ratio of expenses to average net
assets 1.25% 1.25% 1.26% 1.26% 1.25%
Ratio of net investment loss to
average net assets (0.45)% (0.29)% (0.13)% (0.11)% (0.41)%
Ratio of expenses to average net
assets* 1.35% 1.35% 1.36% 1.36% 1.37%
Portfolio Turnover** 69.72% 80.23% 65.85% 83.13% 85.00%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
** Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(a) On January 3, 1994, the Portfolio issued a new series of Shares which
were designated as "Institutional" Shares. The financial highlights
presented for periods prior to January 3, 1994 represent the financial
highlights applicable to Investor Shares.
FINANCIAL HIGHLIGHTS SMALL CAP EQUITY PORTFOLIO
69
- -
<PAGE> 72
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED NOVEMBER 30, APRIL 4, 1994 TO
1998 1997 1996 1995 NOVEMBER 30, 1994(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.97 $12.03 $10.75 $ 9.90 $10.00
-----------------------------------------------------------------------------------------------
INVESTMENT ACTIVITIES
Net investment income (loss) -- (0.03) 0.01 0.01 (0.01)
Net realized and unrealized gains
(losses) from Investments and
foreign currency 1.78 0.33 1.27 0.86 (0.09)
-----------------------------------------------------------------------------------------------
Total from Investment Activities 1.78 0.30 1.28 0.87 (0.10)
-----------------------------------------------------------------------------------------------
DISTRIBUTIONS
Net investment income (0.01) -- -- -- --
In excess of net investment income (0.06) (0.05) -- -- --
Net realized gains (0.43) (0.31) -- (0.01) --
Tax return of capital -- -- -- (0.01) --
-----------------------------------------------------------------------------------------------
Total Distributions (0.50) (0.36) -- (0.02) --
-----------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $13.25 $11.97 $12.03 $10.75 $ 9.90
-----------------------------------------------------------------------------------------------
Total Return 15.37% 2.59% 11.91% 8.78% (1.00)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $8,058 $6,798 $6,059 $2,159 $ 197
Ratio of expenses to average net
assets 1.58% 1.59% 1.44% 1.44% 1.70%(c)
Ratio of net investment income
(loss) to average net assets 0.01% (0.21)% 0.16% 0.13% (0.48)%(c)
Ratio of expenses to average net
assets* 1.75% 1.75% 1.76% 1.75% 2.17%(c)
Portfolio Turnover** 88.95% 75.18% 77.63% 62.78% 21.00%
</TABLE>
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratio would have been as
indicated.
** Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(a) On April 24, 1994, the Portfolio issued an additional series of Shares
which were designated as "Institutional" Shares. The financial highlights
presented for the period April 4, 1994 to April 24, 1994 represent the
financial highlights applicable to Trust Shares.
(b) Not annualized.
(c) Annualized.
FINANCIAL HIGHLIGHTS INTERNATIONAL EQUITY PORTFOLIO
70
- -
<PAGE> 73
[Back Cover Page]
Where to find more information
You'll find more information about the Portfolios in the following documents:
ANNUAL AND SEMI-ANNUAL REPORTS
The Fund's annual and semi-annual reports contain more information about each
Portfolio and a discussion about the market conditions and investment strategies
that had a significant effect on each Portfolio's performance during the last
fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI contains detailed information about the Portfolios and their policies.
By law, it's incorporated by reference into (considered to be part of) this
prospectus.
You can get a free copy of these documents, request other information about the
Portfolios and make shareholder inquiries by calling the Fund at 1-800-452-2724
or by writing to:
Mercantile Mutual Funds, Inc.
P.O. Box 78069
St. Louis, Missouri 63175
If you buy your shares through a broker-dealer or other financial institution,
you may contact your institution for more information.
You can write to the Securities and Exchange Commission (SEC) Public Reference
Section and ask them to mail you information about the Portfolios, including the
SAI. They'll charge you a fee for this service. You can also visit the SEC
Public Reference Room and copy the documents while you're there. For information
about the operation of the Public Reference Room, call the SEC.
Public Reference Section of the SEC
Washington, DC 20549-6009
1-800-SEC-0330
Reports and other information about the Portfolios are also available on the
SEC's website at http://www.sec.gov.
The Fund's Investment Company Act File No. is 811-3567
-60-
<PAGE> 74
FORM N-1A
PART C. OTHER INFORMATION
-------------------------
Item 23. Exhibits
--------
(a) (1) Articles of Incorporation dated September 9,
1982. (2)
(2) Articles Supplementary to Registrant's Articles of
Incorporation dated October 28, 1982. (2)
(3) Articles Supplementary to Registrant's Articles of
Incorporation dated December 22, 1987. (2)
(4) Articles Supplementary to Registrant's Articles of
Incorporation dated as of October 30, 1990. (2)
(5) Articles Supplementary to Registrant's Articles of
Incorporation dated as of November 9, 1990. (2)
(6) Articles Supplementary to Registrant's Articles of
Incorporation dated as of March 19, 1991. (2)
(7) Certificate of Correction dated April 30, 1991 to
Articles Supplementary dated as of March 19,
1991. (2)
(8) Articles Supplementary to Registrant's Articles of
Incorporation dated as of June 25, 1991. (2)
(9) Articles Supplementary to Registrant's Articles of
Incorporation dated as of November 15, 1991. (2)
(10) Articles Supplementary to Registrant's Articles of
Incorporation dated as of January 26, 1993. (2)
(11) Articles Supplementary to Registrant's Articles of
Incorporation dated as of March 23, 1993. (2)
(12) Articles Supplementary to Registrant's Articles of
Incorporation dated as of March 7, 1994. (2)
(13) Certificate of Correction dated October 17, 1994 to
Articles Supplementary dated as of March 8, 1994 to
Registrant's Articles of Incorporation. (2)
-1-
<PAGE> 75
(14) Articles Supplementary to Registrant's Articles of
Incorporation dated as of February 22, 1995. (2)
(15) Articles Supplementary to Registrant's Articles of
Incorporation dated as of April 17, 1995. (2)
(16) Articles Supplementary to Registrant's Articles of
Incorporation dated June 27, 1995. (2)
(17) Articles Supplementary to Registrant's Articles of
Incorporation dated September 18, 1995. (2)
(18) Articles Supplementary to Registrant's Articles of
Incorporation dated August 30, 1996. (4)
(19) Articles Supplementary to Registrant's Articles of
Incorporation dated February 3, 1997. (6)
(20) Articles Supplementary to Registrant's Articles of
Incorporation dated June 17, 1997. (9)
(21) Articles Supplementary to Registrant's Articles of
Incorporation dated October 29, 1997. (11)
(22) Articles Supplementary to Registrant's Articles of
Incorporation dated March 23, 1998. (14)
(23) Articles Supplementary to Registrant's Articles of
Incorporation dated September 17, 1998. (14)
(b) Restated and Amended By-Laws as approved and adopted by Registrant's Board
of Directors. (5)
(c) See Article VI of Registrant's Articles of Incorporation, incorporated by
reference to Post-Effective Amendment No. 34 to Registrant's Registration
Statement on Form N-1A (File No. 2-79285) on February 28, 1996 and
Articles I and IV of Registrant's Restated and Amended By-Laws, incorporated
by reference to Post-Effective Amendment No. 37 to Registrant's Registration
Statement on Form N-1A (File No. 2-79285) on January 30, 1997.
(d) (1) Amended and Restated Advisory Agreement between Registrant and
Mississippi Valley Advisors Inc. dated April 1, 1991. (2)
(2) Addendum No. 1 to Amended and Restated Advisory Agreement between
Registrant and Mississippi Valley Advisors Inc. with respect to the
ARCH Treasury Money Market Portfolio, dated September 27, 1991. (2)
-2-
<PAGE> 76
(3) Addendum No. 2 to Amended and Restated Advisory Agreement between
Registrant and Mississippi Valley Advisors Inc. with respect to the
ARCH Small Cap Equity (formerly Emerging Growth) Portfolio, dated April
1, 1992. (2)
(4) Addendum No. 3 to Amended and Restated Advisory Agreement between
Registrant and Mississippi Valley Advisors Inc. with respect to the
ARCH Balanced Portfolio dated April 1, 1993. (2)
(5) Addendum No. 4 to Amended and Restated Advisory Agreement between
Registrant and Mississippi Valley Advisors Inc. dated March 15,
1994. (2)
(6) Addendum No. 5 to Amended and Restated Advisory Agreement between
Registrant and Mississippi Valley Advisors Inc. with respect to the
Short-Intermediate Municipal Portfolio dated July 10, 1995. (2)
(7) Addendum No. 6 to Amended and Restated Advisory Agreement between
Registrant and Mississippi Valley Advisors Inc. with respect to the
Tax-Exempt Money Market, Missouri Tax-Exempt Bond and Kansas Tax-Exempt
Bond Portfolios dated September 29, 1995. (2)
(8) Addendum No. 7 to Amended and Restated Advisory Agreement between
Registrant and Mississippi Valley Advisors Inc. with respect to the
Equity Income, National Municipal Bond and Intermediate Corporate Bond
(formerly Short-Intermediate Corporate Bond) Portfolios dated November
15, 1996. (5)
(9) Addendum No. 8 to Amended and Restated Advisory Agreement between
Registrant and Mississippi Valley Advisors Inc. with respect to the
Equity Index and Bond Index Portfolios dated February 14, 1997. (6)
(10) Addendum No. 9 to Amended and Restated Advisory Agreement between
Registrant and Mississippi Valley Advisors Inc. with respect to the
Growth Equity Portfolio dated November 21, 1997. (11)
(11) Addendum No. 10 to Amended and Restated Advisory Agreement between
Registrant and Mississippi Valley Advisors Inc. with respect to the
Small Cap Equity Index Portfolio dated December 29, 1998. (15)
(12) Addendum No. 11 to Amended and Restated Advisory Agreement between the
Registrant and Mississippi Valley Advisors Inc. with
-3-
<PAGE> 77
respect to the Conning Money Market Portfolio dated February 12,
1999. (16)
(13) Sub-Advisory Agreement between Mississippi Valley Advisors Inc. and
Clay Finlay Inc. dated August 29, 1996. (4)
(14) Sub-Advisory Agreement between Mississippi Valley Advisors Inc. and
Conning Asset Management Co. with respect to the Conning Money Market
Portfolio dated February 12, 1999. (16)
(e) (1) Distribution Agreement between Registrant and The Winsbury Company
Limited Partnership dated October 1, 1993. (13)
(2) Addendum No. 1 to Distribution Agreement between Registrant and The
Winsbury Company Limited Partnership with respect to the ARCH
International Equity Portfolio dated March 15, 1994. (13)
(3) Addendum No. 2 to Distribution Agreement between Registrant and The
Winsbury Company Limited Partnership with respect to Investor B Shares
of the non-money market Portfolios dated March 1, 1995. (13)
(4) Addendum No. 3 to Distribution Agreement between Registrant and The
Winsbury Company Limited Partnership with respect to the
Short-Intermediate Municipal Portfolio and Investor B Shares of the
Money Market Portfolio. (13)
(5) Addendum No. 4 to Distribution Agreement between Registrant and The
Winsbury Company Limited Partnership with respect to the Tax-Exempt
Money Market, Missouri Tax-Exempt Bond and Kansas Tax-Exempt Bond
Portfolios dated September 29, 1995. (2)
(6) Addendum No. 5 to Distribution Agreement between Registrant and BISYS
Fund Services with respect to the Equity Income, National Municipal
Bond and Intermediate Corporate Bond (formerly Short-Intermediate
Corporate Bond) Portfolios dated November 15, 1996. (5)
(7) Addendum No. 6 to Distribution Agreement between Registrant and BISYS
Fund Services with respect to the Equity Index and Bond Index
Portfolios dated February 14, 1997. (6)
(8) Addendum No. 7 to Distribution Agreement between Registrant and BISYS
Fund Services with respect to the Growth Equity and Small Cap Equity
Index Portfolios dated November 21, 1997. (11)
-4-
<PAGE> 78
(9) Addendum No. 8 to Distribution Agreement between Registrant and BISYS
Fund Services with respect to Trust II Shares of the Money Market
Portfolios. (15)
(10) Addendum No. 9 to Distribution Agreement between the Registrant and
BISYS Fund Services with respect to the Conning Money Market Portfolio
dated February 12, 1999. (16)
(11) Amendment No. 1 to Distribution Agreement between Registrant and The
Winsbury Company Limited Partnership dated as of September 29, 1995.
(1)
(f) None.
(g) (1) Custodian Agreement between Registrant and Mercantile Bank of St. Louis
National Association dated as of April 1, 1992. (13)
(2) Custody Fee Agreement between Registrant and Mercantile Bank of St.
Louis National Association dated April 1, 1995. (13)
(3) Custody Fee Agreement between Registrant and Mercantile Bank of St.
Louis National Association dated July 10, 1995. (13)
(4) Custody Fee Agreement between Registrant and Mercantile Bank of St.
Louis National Association dated September 29, 1995. (2)
(5) Custody Fee Agreement between Registrant and Mercantile Bank National
Association dated November 15, 1996. (5)
(6) Custody Fee Agreement between Registrant and Mercantile Bank National
Association dated February 14, 1997. (6)
(7) Custody Fee Agreement between Registrant and Mercantile Bank of St.
Louis National Association dated November 21, 1997. (11)
(8) Custody Fee Agreement between Registrant and Mercantile Bank National
Association dated February 12, 1999. (16)
(9) Securities Lending Amendment dated August 4, 1994 to Custodian
Agreement dated April 1, 1992 between Registrant and Mercantile Bank of
St. Louis National Association. (13)
(10) Assignment and Delegation of Custodian Agreement between Mercantile
Bank National Association and Mercantile Trust Company National
Association dated December 1, 1998. (15)
-5-
<PAGE> 79
(11) Global Sub-Custodian Agreement among Bankers Trust Company of New York,
Registrant and Mercantile Bank of St. Louis National Association dated
as of April 1, 1994. (13)
(12) Foreign Custody Delegation Agreement between the Registrant and Bankers
Trust Company of New York dated December 4, 1998. (15)
(h) (1) Administration Agreement between Registrant and The Winsbury Service
Corporation dated October 1, 1993. (13)
(2) Addendum No. 1 to Administration Agreement between Registrant and The
Winsbury Service Corporation with respect to the ARCH International
Equity Portfolio dated March 15, 1994. (13)
(3) Addendum No. 2 to Administration Agreement between Registrant and BISYS
Fund Services Ohio, Inc. (formerly known as The Winsbury Service
Corporation) with respect to Investor B Shares of the non-money market
Portfolios dated as of March 1, 1995. (13)
(4) Addendum No. 3 to Administration Agreement between Registrant and BISYS
Fund Services Ohio, Inc. with respect to the Short-Intermediate
Municipal Portfolio and Investor B Shares of the Money Market Portfolio
dated July 10, 1995. (13)
(5) Addendum No. 4 to Administration Agreement between Registrant and BISYS
Fund Services Ohio, Inc. with respect to the Tax-Exempt Money Market,
Missouri Tax-Exempt Bond and Kansas Tax-Exempt Bond Portfolios dated
September 29, 1995. (2)
(6) Addendum No. 5 to Administration Agreement between Registrant and BISYS
Fund Services Ohio, Inc. with respect to the Equity Income, National
Municipal Bond and Intermediate Corporate bond (formerly
Short-Intermediate Corporate Bond) Portfolios dated November 15,
1996. (5)
(7) Addendum No. 6 to Administration Agreement between Registrant and BISYS
Fund Services Ohio, Inc. with respect to the Equity Index and Bond
Index Portfolios dated February 14, 1997. (6)
(8) Addendum No. 7 to Administration Agreement between Registrant and BISYS
Fund Services Ohio, Inc. with respect to the Growth Equity and Small
Cap Equity Index Portfolios dated November 21, 1997. (11)
-6-
<PAGE> 80
(9) Addendum No. 8 to Administration Agreement between Registrant and BISYS
Fund Services Ohio, Inc. with respect to Trust II Shares of the Money
Market Portfolios. (15)
(10) Addendum No. 9 to Administration Agreement between Registrant and BISYS
Fund Services Ohio, Inc. with respect to the Conning Money Market
Portfolio dated February 12, 1999. (16)
(11) Transfer Agency Agreement between Registrant and The Winsbury Service
Corporation dated October 1, 1993. (13)
(12) Addendum No. 1 to Transfer Agency Agreement between Registrant and The
Winsbury Service Corporation with respect to the ARCH International
Equity Portfolio dated March 15, 1994. (13)
(13) Addendum No. 2 to Transfer Agency Agreement between Registrant and
BISYS Fund Services Ohio, Inc. (formerly known as The Winsbury Service
Corporation) with respect to Investor B Shares of the non-money market
Portfolios dated as of March 1, 1995. (13)
(14) Addendum No. 3 to Transfer Agency Agreement between Registrant and
BISYS Fund Services Ohio, Inc. with respect to the Short-Intermediate
Municipal Portfolio and Investor B Shares of the Money Market Portfolio
dated July 10, 1995. (13)
(15) Addendum No. 4 to Transfer Agency Agreement between Registrant and
BISYS Fund Services Ohio, Inc. with respect to the Tax-Exempt Money
Market, Missouri Tax-Exempt Bond and Kansas Tax-Exempt Bond Portfolios
dated September 29, 1995. (2)
(16) Addendum No. 5 to Transfer Agency Agreement between Registrant and
BISYS Fund Services Ohio, Inc. with respect to the Equity Income,
National Municipal Bond and Intermediate Corporate Bond (formerly
Short-Intermediate Corporate Bond) Portfolios dated November 15,
1996. (5)
(17) Addendum No. 6 to Transfer Agency Agreement between Registrant and
BISYS Fund Services Ohio, Inc. with respect to the Equity Index and
Bond Index Portfolios dated February 14, 1997. (6)
(18) Addendum No. 7 to Transfer Agency Agreement between Registrant and
BISYS Fund Services Ohio, Inc. with respect to the Growth Equity and
Small Cap Equity Index Portfolios dated November 21, 1997. (10)
-7-
<PAGE> 81
(19) Addendum No. 8 to Transfer Agency Agreement between Registrant and
BISYS Fund Services Ohio, Inc. with respect to Trust II Shares of the
Money Market Portfolios. (15)
(20) Addendum No. 9 to Transfer Agency Agreement between Registrant and
BISYS Fund Services Ohio, Inc. with respect to the Conning Money Market
Portfolio dated February 12, 1999. (16)
(21) Amendment No. 1 to Transfer Agency Agreement between Registrant and
BISYS Fund Services Ohio, Inc. dated as of September 29, 1995. (1)
(22) Amendment No. 2 to Transfer Agency Agreement between Registrant and
BISYS Fund Services Ohio, Inc. dated October 1, 1995. (2)
(23) Administrative Services Plan (Trust Shares) and Form of Agreement. (8)
(24) Administrative Services Plan (Institutional Shares) and Form of
Agreement. (8)
(25) Form of Shareholder Services Plan and Form of Servicing Agreement with
respect to the Conning Money Market Porfolio. (14)
(26) Agreement and Plan of Reorganization between Registrant and Arrow
Funds. (9)
(i)Opinion and consent of counsel. (13)
(j) (1) Consent of Independent Auditors. (17)
(2) Consent of Drinker Biddle & Reath LLP. (17)
(k) None.
(l) (1) Purchase Agreement between Registrant and Shearson/American Express
Inc. dated November 23, 1982. (13)
(2) Purchase Agreement between Registrant and The Winsbury Service
Corporation dated April 1, 1994. (13)
(3) Purchase Agreements between Registrant and BISYS Fund Services Ohio,
Inc. dated as of February 28, 1995. (13)
(4) Purchase Agreements between Registrant and BISYS Fund Services Ohio,
Inc. dated as of July 7, 1995. (13)
-8-
<PAGE> 82
(5) Purchase Agreements between Registrant and BISYS Fund Services Ohio,
Inc. dated September 29, 1995. (2)
(6) Purchase Agreement between Registrant and BISYS Fund Services Ohio,
Inc. dated November 14, 1996. (5)
(7) Purchase Agreements between Registrant and BISYS Fund Services Ohio,
Inc. dated February 6, 1997. (6)
(8) Purchase Agreement between Registrant and BISYS Fund Services Ohio,
Inc. dated February 27, 1997. (6)
(9) Purchase Agreement between Registrant and BISYS Fund Services Ohio,
Inc. dated April 30, 1997. (7)
(10) Purchase Agreements between Registrant and BISYS Fund Services Ohio,
Inc. dated November 21, 1997. (11)
(11) Purchase Agreements between Registrant and BISYS Fund Services Ohio,
Inc. dated December 29, 1998. (15)
(12) Purchase Agreement between Registrant and BISYS Fund Services Ohio,
Inc. dated February 12, 1999. (16)
(m) (1) Distribution and Services Plan (Investor A Shares) under Rule 12b-1 and
Form of Agreement. (8)
(2) Distribution and Services Plan (Investor B Shares) under Rule 12b-1 and
Form of Agreement. (8)
(n) Financial Data Schedules. (16)
(o) Amended and Restated Plan Pursuant to Rule 18f-3 for Operation of a
Multi-Class System. (16)
- -------------------
1. Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 33 to Registrant's Registration Statement on
Form N-1A (File No. 2-79285) on January 2, 1996.
2. Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 34 to Registrant's Registration Statement on
Form N-1A (File No. 2-79285) on February 28, 1996.
-9-
<PAGE> 83
3. Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 35 to Registrant's Registration Statement on
Form N-1A (File No. 2-79285) on March 28, 1996.
4. Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 36 to Registrant's Registration Statement on
Form N-1A (File No. 2-79285) on October 8, 1996.
5. Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 37 to Registrant's Registration Statement on
Form N-1A (File No. 2-79285) on January 30, 1997.
6. Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 38 to Registrant's Registration Statement on
Form N-1A (File No. 2-79285) on March 31, 1997.
7. Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 39 to Registrant's Registration Statement on
Form N-1A (File No. 2-79285) on May 28, 1997.
8. Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 40 to Registrant's Registration Statement on
Form N-1A (File No. 2-79285) on June 18, 1997.
9. Filed electronically as an Exhibit and incorporated herein by reference to
Registrant's Registration Statement on Form N-14 (File No. 333-33423) on
August 12, 1997.
10. Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 41 to Registrant's Registration Statement on
Form N-1A (File No. 2-79285) on August 29, 1997.
11. Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 42 to Registrant's Registration Statement on
Form N-1A (File No. 2-79285) on January 29, 1998.
12. Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 43 to Registrant's Registration Statement on
Form N-1A (File No. 2-79285) on January 30, 1998.
13. Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 44 to Registrant's Registration Statement on
Form N-1A (File No. 2-79285) on March 31, 1998.
14. Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 45 to Registrant's Registration Statement on
Form N-1A (File No. 2-79285) on November 5, 1998.
-10-
<PAGE> 84
15. Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 46 to Registrant's Registration Statement on
Form N-1A (File No. 2-79285) on January 28, 1999.
16. Filed electronically as an Exhibit and incorporated herein by reference to
Post-Effective Amendment No. 47 to Registrant's Registration Statement on
Form N-1A (File No. 2-79285) on March 30, 1999.
17. A copy of such Exhibit is filed electronically herein.
Item 24. Persons Controlled By or Under Common Control with Registrant
-------------------------------------------------------------
Not applicable
Item 25. Indemnification
---------------
Indemnification of Registrant's principal underwriter, custodian and
transfer agent against certain losses is provided for, respectively, in Section
7 of the Distribution Agreement, incorporated herein by reference as Exhibit
(e)(1), in Section 24 of the Custodian Agreement, incorporated herein by
reference as Exhibit (g)(1) and in Section 18 of the Transfer Agency Agreement
incorporated herein by reference as Exhibit (h)(12). The Registrant has obtained
from a major insurance carrier a directors' and officers' liability policy
covering certain types of errors and omissions. In no event will the Registrant
indemnify any of its directors, officers, employees or agents against any
liability to which such person would otherwise be subject by reason of his
willful misfeasance, bad faith or gross negligence in the performance of his
duties, or by reason of his reckless disregard of the duties involved in the
conduct of his office or under his agreement with the Registrant. Registrant
will comply with Rule 484 under the Securities Act of 1933 and Release 11330
under the Investment Company Act of 1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
-11-
<PAGE> 85
A. Mississippi Valley Advisors Inc. is registered as an investment
adviser with the Securities and Exchange Commission and is responsible for
providing advisory services to each of Registrant's investment portfolios.
B. The information required by this Item 26 with respect to each
Director and Officer of Mississippi Valley Advisors Inc. is incorporated by
reference to Form ADV and Schedules A and D filed by Mississippi Valley Advisors
Inc. with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934 (File No. 801-28897).
C. Clay Finlay Inc. is registered as an investment adviser with the
Securities and Exchange Commission and provides sub-advisory services to the
Registrant's International Equity Portfolio.
D. The information required by this Item 26 with respect to each
Director and Officer of Clay Finlay Inc. is included in Form ADV and Schedules A
and D filed by Clay Finlay Inc. with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934 (File No. 801-17316).
E. Conning Asset Management Co. is registered as an investment adviser
with the Securities and Exchange Commission and provides sub-advisory services
to the Registrant's Conning Money Market Portfolio.
F. The information required by this Item 26 with respect to each
Director and Officer of Conning Asset Management Co. is included in Form ADV and
Schedules A and D filed by Conning Asset Management Co. with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934 (File No.
8011-8641).
Item 27. Principal Underwriter
---------------------
A. BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services
(formerly The Winsbury Company Limited Partnership) acts as distributor
and its affiliate, BISYS Fund Services Ohio, Inc., acts as
administrator and transfer agent for the Registrant. BISYS Fund
Services also distributes the securities of Alpine Equity Trust,
American Performance Funds, AmSouth Mutual Funds, The BB&T Mutual Funds
Group, The Coventry Group, ESC Strategic Funds, The Eureka Funds,
Governor Funds, Gradison Custodian Trust, Gradison Growth Trust,
Gradison-MCDonald Cash Reserves Trust, Gradison-McDonald Municipal
Custodian Trust, Fifth Third Funds, Hirtle Callaghan Trust, HSBC Family
of Funds, INTRUST Funds Trust, The Infinity Mutual Funds, Inc., The
Kent Funds, Magna Funds, Meyers Investment Trust, MMA Praxis Mutual
Funds, M.S.D.&T. Funds, Pacific Capital Funds, The Parkstone Advantage
Funds, The Republic Advisors Funds Trust, Puget Sound Alternative
Investment Series Trust, The Republic Funds Trust, Sefton Funds, SsgA
International Liquidity Fund, Summit Investment Trust, Variable
Insurance Funds, The Victory Portfolios, The Victory Variable Insurance
Funds and Vintage Mutual Funds, Inc.
-12-
<PAGE> 86
B. To the best of Registrant's knowledge, the partners of BISYS Fund
Services are as follows:
<TABLE>
<CAPTION>
=====================================================================================================
Positions and Offices
Name and Principal with BISYS Positions and Offices
Business Address Fund Services with Registrant
---------------- ------------- ---------------
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
BISYS Fund Services, Inc. Sole General Partner None
3435 Stelzer Road
Columbus, Ohio 43219-3035
WC Subsidiary Corporation Sole Limited Partner
150 Clove Road None
Little Falls, NJ 07424
=====================================================================================================
</TABLE>
C. None.
Item 28. Location of Accounts and Records
--------------------------------
(1) Mercantile Trust Company National Association, One Mercantile
Center, 8th and Locust Streets, St. Louis, MO 63101 (records relating
to its functions as custodian).
(2) BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219
(records relating to its functions as distributor).
(3) Mississippi Valley Advisors Inc., 7th and Washington Streets,
21st Floor, St. Louis, MO 63101 (records relating to its functions as
investment adviser).
(4) BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus,
Ohio 43219 (records relating to its function as administrator).
(5) BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus,
Ohio 43219 (records relating to its function as transfer agent and
dividend disbursing agent).
(6) Drinker Biddle & Reath LLP, Philadelphia National Bank
Building, 1345 Chestnut Street, Philadelphia, PA 19107-3496
(Registrant's Articles of Incorporation, By-Laws and Minute Books).
(7) Clay Finlay Inc., 200 Park Avenue, 56th Floor, New York,
New York 10166 (records relating to its function as sub-adviser to the
International Equity Portfolio).
(8) Bankers Trust Company, 16 Wall Street, New York, New York
10005 (records relating to its function as sub-custodian for the
International Equity Portfolio).
-13-
<PAGE> 87
(9) Conning Asset Management Co., 700 Market Street, St. Louis,
Missouri 63101 (records relating to its function as sub-adviser to the
Conning Money Market Portfolio).
Item 29. Management Services
-------------------
Not applicable.
Item 30. Undertakings
------------
Not applicable.
-14-
<PAGE> 88
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment No. 48 to
its Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment No. 48 to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of St. Louis and the State of Missouri, on the 2nd
day of April, 1999.
THE ARCH FUND, INC.
(Registrant)
/s/ Jerry V. Woodham
--------------------
Jerry V. Woodham
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 48 to Registrant's Registration Statement on Form
N-1A has been signed below by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Jerry V. Woodham Chairman of the Board, April 2, 1999
- -------------------- Director and President
Jerry V. Woodham
/s/* James C. Jacobsen Director April 2, 1999
James C. Jacobsen
/s/* Joseph J. Hunt Director April 2, 1999
- -------------------
Joseph J. Hunt
/s/* Robert M. Cox, Jr. Director April 2, 1999
- -----------------------
Robert M. Cox, Jr.
/s/* Ronald D. Winney Director & Treasurer April 2, 1999
- ---------------------
Ronald D. Winney
/s/* Donald E. Brandt Director April 2, 1999
- ---------------------
Donald E. Brandt
/s/* Patrick J. Moore Director April 2, 1999
- ---------------------
Patrick J. Moore
*By: /s/ Jerry V. Woodham
----------------------
Jerry V. Woodham
Attorney-in-fact
</TABLE>
<PAGE> 89
THE ARCH FUND(R), INC.
POWER OF ATTORNEY
Donald E. Brandt, whose signature appears below, does hereby
constitute and appoint Jerry V. Woodham and W. Bruce McConnel, III, and either
of them, his true and lawful attorneys and agents, with full power of
substitution and resubstitution, to do any and all acts and things and execute
any and all instruments which said attorneys and agents, or either of them, may
deem necessary or advisable or which may be required to enable The ARCH Fund,
Inc. (the "Fund") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended, and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Fund's Registration
Statement and of any and all amendments (including post-effective amendments) to
the Fund's Registration Statement on Form N-1A pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned on behalf of
the Fund and/or as a director and/or officer of the Fund any and all amendments
filed with the Securities and Exchange Commission under said Acts, and any other
instruments or documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue hereof.
/s/ Donald E. Brandt
----------------------
Donald E. Brandt
Date: March 15, 1999
<PAGE> 90
THE ARCH FUND(R), INC.
POWER OF ATTORNEY
Robert M. Cox, Jr., whose signature appears below, does hereby
constitute and appoint Jerry V. Woodham and W. Bruce McConnel, III, and either
of them, his true and lawful attorneys and agents, with full power of
substitution and resubstitution, to do any and all acts and things and execute
any and all instruments which said attorneys and agents, or either of them, may
deem necessary or advisable or which may be required to enable The ARCH Fund,
Inc. (the "Fund") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended, and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Fund's Registration
Statement and of any and all amendments (including post-effective amendments) to
the Fund's Registration Statement on Form N-1A pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned on behalf of
the Fund and/or as a director and/or officer of the Fund any and all amendments
filed with the Securities and Exchange Commission under said Acts, and any other
instruments or documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue hereof.
/s/ Robert M. Cox, Jr.
--------------------------
Robert M. Cox, Jr.
Date: March 15, 1999
<PAGE> 91
THE ARCH FUND(R), INC.
POWER OF ATTORNEY
Patrick J. Moore, whose signature appears below, does hereby
constitute and appoint Jerry V. Woodham and W. Bruce McConnel, III, and either
of them, his true and lawful attorneys and agents, with full power of
substitution and resubstitution, to do any and all acts and things and execute
any and all instruments which said attorneys and agents, or either of them, may
deem necessary or advisable or which may be required to enable The ARCH Fund,
Inc. (the "Fund") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended, and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Fund's Registration
Statement and of any and all amendments (including post-effective amendments) to
the Fund's Registration Statement on Form N-1A pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned on behalf of
the Fund and/or as a director and/or officer of the Fund any and all amendments
filed with the Securities and Exchange Commission under said Acts, and any other
instruments or documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue hereof.
/s/ Patrick J. Moore
-------------------------
Patrick J. Moore
Date: March 15, 1999
<PAGE> 92
THE ARCH FUND(R), INC.
POWER OF ATTORNEY
Ronald D. Winney, whose signature appears below, does hereby
constitute and appoint Jerry V. Woodham and W. Bruce McConnel, III, and either
of them, his true and lawful attorneys and agents, with full power of
substitution and resubstitution, to do any and all acts and things and execute
any and all instruments which said attorneys and agents, or either of them, may
deem necessary or advisable or which may be required to enable The ARCH Fund,
Inc. (the "Fund") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended, and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Fund's Registration
Statement and of any and all amendments (including post-effective amendments) to
the Fund's Registration Statement on Form N-1A pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned on behalf of
the Fund and/or as a director and/or officer of the Fund any and all amendments
filed with the Securities and Exchange Commission under said Acts, and any other
instruments or documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue hereof.
/s/ Ronald D. Winney
--------------------------
Ronald D. Winney
Date: March 15, 1999
<PAGE> 93
THE ARCH FUND(R), INC.
POWER OF ATTORNEY
James C. Jacobsen, whose signature appears below, does hereby
constitute and appoint Jerry V. Woodham and W. Bruce McConnel, III, and either
of them, his true and lawful attorneys and agents, with full power of
substitution and resubstitution, to do any and all acts and things and execute
any and all instruments which said attorneys and agents, or either of them, may
deem necessary or advisable or which may be required to enable The ARCH Fund,
Inc. (the "Fund") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended, and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Fund's Registration
Statement and of any and all amendments (including post-effective amendments) to
the Fund's Registration Statement on Form N-1A pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned on behalf of
the Fund and/or as a director and/or officer of the Fund any and all amendments
filed with the Securities and Exchange Commission under said Acts, and any other
instruments or documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue hereof.
/s/ James C. Jacobsen
-------------------------
James C. Jacobsen
Date: March 15, 1999
<PAGE> 94
THE ARCH FUND(R), INC.
POWER OF ATTORNEY
Joseph J. Hunt, whose signature appears below, does hereby
constitute and appoint Jerry V. Woodham and W. Bruce McConnel, III, and either
of them, his true and lawful attorneys and agents, with full power of
substitution and resubstitution, to do any and all acts and things and execute
any and all instruments which said attorneys and agents, or either of them, may
deem necessary or advisable or which may be required to enable The ARCH Fund,
Inc. (the "Fund") to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended, and any rules, regulations, or
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Fund's Registration
Statement and of any and all amendments (including post-effective amendments) to
the Fund's Registration Statement on Form N-1A pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned on behalf of
the Fund and/or as a director and/or officer of the Fund any and all amendments
filed with the Securities and Exchange Commission under said Acts, and any other
instruments or documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue hereof.
/s/ Joseph J. Hunt
--------------------------
Joseph J. Hunt
Date: March 15, 1999
<PAGE> 95
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
(j) (1) Consent of Independent Auditors.
(j) (2) Consent of Drinker Biddle & Reath LLP.
<PAGE> 1
Exhibit (j)(1)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of
Mercantile Mutual Funds, Inc. (formerly The ARCH Fund, Inc.):
We consent to the use of our report dated January 20, 1999 for The ARCH Fund,
Inc. as incorporated by reference herein and to the reference of our firm under
the headings "Financial Highlights" in the Prospectuses and "Current
Prospectuses", "Independent Auditors" and "Financial Statements" in the
Statement of Additional Information included herein or incorporated by
reference.
Columbus, Ohio
April 2, 1999
/s/ KPMG LLP
-----------------
KPMG LLP
<PAGE> 1
Exhibit (j)(2)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references
to our Firm under the caption "Counsel" in the Statement of Additional
Information that is incorporated by reference into Post-Effective Amendment No.
48 to the Registration Statement (No. 2-79285) on Form N-1A under the Securities
Act of 1933, as amended, of Mercantile Mutual Funds, Inc. (formerly known as The
Arch Fund, Inc.) This consent does not constitute a consent under Section 7 of
the Securities Act of 1933, and in consenting to the use of our name and the
references to our Firm under such caption we have not certified any part of the
Registration Statement and do not otherwise come within the categories of
persons whose consent is required under Section 7 or the rules and regulations
of the Securities and Exchange Commission thereunder.
/s/ Drinker Biddle & Reath LLP
---------------------------
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
April 2, 1999
